Busted: Biggest personal loan myths

close up magnifying glass on australian money saved through good personal loan management

Whether it’s upgrading your car, investing in some home improvements or even consolidating debts, a personal loan can be a very valuable tool. But before you borrow there are some common misconceptions around personal loans that need to be busted.

Let's separate fact from fiction.

Myth 1: You need to go to your bank for a personal loan.

While approaching your current bank for a personal loan may seem like the easiest option, you could end up paying a lot more money if you don't shop around.

We compare over 200 personal loans here at Mozo and variable interest rates start from as low as 3.99% p.a. (4.99% p.a. comparison rate) and go to over 20% p.a..

Myth 2: Big banks have the best personal loan rates.

While the big banks offer a wide variety of services, they don’t always have the best personal loan rates. In addition to the big players there are a range of lenders to choose from including digital only lenders, customer-owned and challenger banks. 

Most lenders will also have online application and approval processes which means that you could get your funds approved and funded faster as well.

Myth 3: Personal loans have very high interest rates.

In recent years, there has been a move away from the one interest rate fits all personal loan model towards more personalised interest rates based on your credit history.

Lenders now take into account your credit history, along with other criteria when determining your interest rate and so you've got a good to excellent credit history, then 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 average unsecured personal loan rate in our database at 9.45% compared with the average credit card interest rate of 17.01%.

In the market for a personal loan? Check out our editor’s top personal loans this month.

Top personal loans - last updated 16 May 2022

Search promoted personal loans below or do a full Mozo database search. Advertiser disclosure
  • Personal Loan

    Unsecured, Fixed, Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.39% p.a.to 7.89% p.a.
    6.39% p.a.to 8.49% p.a.based on $30,000
    over 5 years

    With low rates for borrowers with excellent credit, a quick 1 minute rate estimate and simple online application, there’s a lot to love about this loan! You’ll not only benefit from no exit fees, there are also no early repayment fees. You could qualify by simply earning above $25,000 and you’ll be on the way to start spending (other eligibility criteria may apply).

    Repayment terms from 3 years to 5 years. Representative example: a 5 year $30,000 loan at 6.39% would cost $35,126.40 including fees.

    Details
  • Home Improvement Loan

    Fixed, Unsecured

    interest rate
    comparison rate
    Monthly repayment
    5.75% p.a.
    5.96% p.a.based on $30,000
    over 5 years

    Handypay offers flexible home improvement loans for Excellent Credit or better. Handypay is a specialist home improvement plan provider and offers loans up to $75,000.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 5.75% would cost $34,840.18 including fees.

    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.35% p.a.to 19.09% p.a.
    6.14% p.a.to 19.99% p.a.based on $30,000
    over 5 years

    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).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.35% would cost $34,832.61 including fees.

    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.95% p.a.to 17.45% p.a.
    6.79% p.a.to 17.86% p.a.based on $30,000
    over 5 years

    Wisr offers personal loans for any worthwhile purpose, tailored to your credit score to ensure you’re getting a fair deal. Plus, no ongoing or early exit fees. Loans from $5,000 to $79,000. Terms of either 3, 5 or 7 years. $595 establishment fee. Eligibility criteria applies.

    Repayment terms from 3 years to 5 years. Representative example: a 5 year $30,000 loan at 5.95% would cost $35,352.21 including fees.

    Details
  • Green Loan

    interest rate
    comparison rate
    Monthly repayment
    5.79% p.a.
    6.36% p.a.based on $30,000
    over 5 years

    Handypay offer flexible green loans up to $75,000 for Excellent Credit or better. Handypay is a specialist home improvement plan provider.

    Repayment terms from 1 year to 10 years. Representative example: a 5 year $30,000 loan at 5.79% would cost $34,873.55 including fees.

    Details
  • Secured Car Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.79% p.a.
    7.16% p.a.based on $30,000
    over 5 years

    Reach your goal sooner without being penalised with $0 early payout fee. $0 monthly fees. Choose to make either monthly, fortnightly or weekly repayments to suit your income and budget. Winners of Australia's Best Large Credit Union in 2020.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.79% would cost $35,729.09 including fees.

    Details
  • Standard Personal Loan

    Fixed, Unsecured

    interest rate
    comparison rate
    Monthly repayment
    7.99% p.a.
    8.62% p.a.based on $30,000
    over 5 years

    Heritage Bank discounted rates for borrowers with excellent credit. Available loans starting from $5,000 to $25,000. Your choice of loan terms up to five years. Extra repayments allowed, but may incur fees.

    Repayment terms from 1 year to 7 years. Representative example: a n/a year $0 loan at 7.99% would cost $6,988.90 including fees.

    Details

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* 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

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

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.