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. However, there are some common misconceptions around personal loans that need to be busted before you borrow.

It’s time to separate fact from fiction. So you can jump into the process worry-free, the money experts at Mozo have debunked some of the biggest personal loan myths.

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

While approaching your bank for a personal loan may seem like the easiest option, you could end up paying a lot more money. According to the Mozo database, personal loan variable interest rates range from as low as 3.99% p.a. (4.99% p.a. comparison rate) to 20.99% p.a (23.83% p.a. comparison rate), so it's smart to shop around for the best rates.

Personal loan 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. There are a lot of other trustworthy lenders in the marketplace and, often, some of the most competitive rates are found outside of the big-name institutions. You should consider all your options, including online lenders, challenger banks and customer-owned banks.

Personal loan myth 3: Personal loans have very high interest rates.

Some people believe this because personal loan rates are generally higher than home loan rates. For example, in the Mozo database, personal loan rates, on average, are around 6% higher than home loan rates. But this occurs because personal loans are significantly smaller sums of money with much shorter loan terms.

In the Mozo database, the average personal loan rate is also actually more than 7% cheaper than the average credit card rate, so if a personal loan is for you it could be more budget-friendly than your go-to plastic.

If you’re in the market for a personal loan, check out our editor’s top personal loan picks for this month:

Top personal loans - rates updated daily

Search promoted personal loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Personal Loan

    Unsecured, Fixed

    interest rate
    comparison rate
    Monthly repayment
    4.99% p.a.to 19.99% p.a.
    4.99% p.a.to 19.99% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • Hot DealA special low rate starting from 5.45% (6.07% comparison rate)
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    Mozo Experts Choice 2021
    Low Rate Personal Loan (Fixed, Unsecured)

    Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    5.45% p.a.to 8.48% p.a.
    6.07% p.a.to 8.84% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • Hot DealNo fees for borrowers with excellent credit
    placeholder
    Mozo Experts Choice 2021
    No Fee Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.95% p.a.to 17.95% p.a.
    5.95% p.a.to 17.95% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • placeholder
    Personal Loan

    Unsecured, Fixed, Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.39% p.a.to 7.49% p.a.
    6.39% p.a.to 8.19% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • placeholder
    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
    Go to site
    Details
  • Hot DealApply online and get a quote in minutes
    placeholder
    Unsecured Personal Loan

    Excellent Credit, Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.95% p.a.to 10.49% p.a.
    5.95% p.a.to 12.83% p.a.based on $10,000
    over 3 years
    Go to site
    Details
  • placeholder
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.49% p.a.to 20.95% p.a.
    6.49% p.a.to 20.95% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • placeholder
    Personal Loan

    Fixed, Unsecured

    interest rate
    comparison rate
    Monthly repayment
    6.99% p.a.to 18.99% p.a.
    7.91% p.a.to 19.83% p.a.based on $30,000
    over 5 years
    Go to site
    Details
  • placeholder
    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
    Go to site
    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.