Don’t let these common misconceptions hold you back from choosing a personal loan

By Kylie Moss · · 2 min read
Fact Checked
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There is a common misconception that if you need to take out a personal loan to cover unexpected expenses or fund a purchase, you must be bad at saving and financial management.  But the reality is, personal loans are commonly used by Australians across various income levels and for all sorts of reasons.

Borrowing money to help fund a new car, dream holiday, or kitchen upgrade can be a smart way to achieve your goals sooner and spread the cost over time.  

Personal loans also offer flexibility which include features that give you power to choose a loan and repayment term that’s best for you. For instance, depending on the lender, loan terms start from as little as one year, repayments can be made to suit your pay cycle (weekly, fortnightly or monthly), and you can often pay out your loan early without paying hefty penalties or fees.   

But even with all these added benefits there are still some misconceptions floating around, so we felt it’s time we busted them! 

Myth: Personal loans have very high interest rates

Fact: Many lenders have moved away from the one-interest-rate-fits-all personal loan model towards more personalised interest rates.

They take into account your credit history, along with other criteria when determining your interest rate, and so if you've got a good to excellent credit history, it's likely that you could be approved for one of the lower interest rate bands available.

Personal loan rates are also generally cheaper than credit card rates, with the current average unsecured personal loan rate in our database at 9.81% p.a. (and the average secured multi-purpose loan sitting at 9.16% p.a.) compared with the average credit card interest rate of 17.66% p.a.

Myth: All personal loans require collateral

Fact: In addition to secured personal loans, many lenders also offer unsecured personal loans, which means you do not have to put up an asset such as a house or a car as collateral for the loan. Unsecured loans do however, often come with higher interest rates but they also usually allow extra repayments which can help you to save on interest payments. 

Myth: Personal loans are only for people with perfect credit. 

Fact: While a good credit score can help you secure a lower interest rate, many lenders offer personal loans to people with average or even low credit scores. Lenders also consider other factors, such as your income, employment history, and existing debt, when evaluating your application.

  • Compare personal loan deals

    Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can search our database of 380 home loans.
    Last updated 5 December 2025 Important disclosures and comparison rate warning*

  • Unsecured Personal Loan

    • Fixed
    Interest rate from
    5.76 % p.a.
    to
    24.03 % p.a.
    Comparison rate from
    5.76 % p.a.
    to
    24.98 % p.a.
    Based on $30,000 over 5 years
    Go to site

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

  • Unsecured Personal Loan

    • Fixed
    Interest rate from
    5.95 % p.a.
    to
    26.95 % p.a.
    Comparison rate from
    5.95 % p.a.
    to
    26.95 % p.a.
    Based on $30,000 over 5 years
    Go to site

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023, 2024 & 2025^'

  • Low Rate Personal Loan

    • Exceptional Credit, $5,000 - $75,000, or up to $100,000 for eligible purposes
    Interest rate from
    5.95 % p.a.
    to
    18.99 % p.a.
    Comparison rate from
    5.95 % p.a.
    to
    21.78 % p.a.
    Based on $30,000 over 5 years
    Go to site

    Competitive low rates for borrowers with exceptional credit on 1-7 year loans from $5,000 up to $75,000 (or up to $100K for home improvements or car loans); no monthly account keeping fees, no exit fees and no early repayment fees. Winner of Mozo's Experts Choice Excellent Credit Unsecured Personal Loan 2024 and Excellent Credit Secured Personal Loan 2024 awards ^. Min. income of 25k after tax, to apply.

  • Unsecured Personal Loan

    Interest rate from
    6.17 % p.a.
    to
    21.99 % p.a.
    Comparison rate from
    6.17 % p.a.
    to
    22.79 % p.a.
    Based on $30,000 over 5 years
    Go to site

    Competitive fixed rates for borrowers on 1-7 year loans from $5,000 up to $50,000. $0 monthly fees and no early repayment fees to pay. Fast application process on the Revolut app. According to Revolut and subject to loan approval, you'll receive your money into your Revolut account straight away.

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

^See information about the Mozo Experts Choice Personal Loan Awards

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While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

Today's personal loans deals