Customer-owned banks vs the big banks: who offers cheaper personal loans and BIGGER savings?

Katherine O'Chee

21 Oct 2019

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If you’ve been searching for that extra bit of cash to fund your dream wedding or your next holiday overseas, chances are you’ve come across a whole range of personal loans. But with so many lenders out there, which one should you choose? 

While it’s no easy feat to find your perfect match, getting cosy with one of the Big 4 Banks isn’t the way to go, according to Mozo data which shows that opting for a customer-owned bank instead could cut down your interest costs by nearly 20%.*

In other words, if you took out a $10,000 unsecured personal loan over 5 years, you could save $733 in total interest just by switching from the Big 4’s average rate of 13.40% p.a. to the average rate for customer-owned banks of 10.99% p.a..** 

And if we’re talking about an even bigger bang for your buck, just place the lowest-rate unsecured personal loan from a customer-owned bank in Mozo’s database - 5.99% p.a. (6.20% p.a. comparison rate^^) - beside the Big 4’s average rate, and watch the total interest drop almost twofold from $3,042 to $1,597.***

RELATED ARTICLE: Rate freeze: Big banks aren’t budging on personal loans 

Customer-owned banks, including credit unions and mutual banks, generally offer more competitive interest rates than the Big 4 for a simple reason: since they’re are funded by members for members, any profits they make are funnelled back into the organisation instead of ending up in the hands of the investors. 

The People’s Choice Credit Union’s spokesperson Stuart Symons said customers making the switch aren’t just getting a better deal - they’re also providing fuel for other banks to do better.

“More measures are being introduced by the Government to improve standards and provide fairer competition in the banking industry, but if more people switch, if more people vote with their feet, that will be the biggest catalyst for better service and better value,” Symons said. 

“So if you are going to switch, let your new bank or credit union know why you have chosen them. Likewise, let the old one know why you’ve walked so they can improve as well.”

People's Choice Credit Union themselves were recognised by their members as an Aussie favourite when they won our Mozo People’s Choice Awards for Excellent Customer Service this year, alongside other customer-owned options like Bank Australia, CUA, and Heritage Bank. 

So if you’re digging around for extra funds to finance your wedding, Japan trip or home renovation project, check out these personal loans from customer-owned banks offering big-bank beating interest rates.

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People's Choice Credit Union Low Rate Unsecured Personal Loan
  • Fixed rates from 9.99% p.a. (11.74% p.a. comparison rate^)

  • Free extra repayments & redraw facility

  • $0 monthly fee on your People’s Choice Credit Union Zip bank account

After a top-notch personal loan to help cover a big expense? Then don’t miss out on the People’s Choice Credit Union Low Rate Unsecured Personal Loan! This value-packed loan comes with competitive fixed rates from 9.99% p.a. (11.74% p.a. comparison rate^) on amounts between $2,000 and $40,000 as well as hot features like extra repayments, a redraw facility and flexible repayment options. And if you’re also using other People’s Choice products, you’ll be pleased that this loan lets you dodge the $6 service fee on your People's Choice Credit Union Zip bank account. Keep in mind there is a $250 upfront fee to consider.

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CUA Unsecured Personal Loan
  • Fixed rates from 9.89% p.a. (10.14% p.a. comparison rate^^)

  • Free extra repayments & redraw facility

  • No ongoing fees

For loans between $5,000 and $50,000 over 1 to 7 years, look no further than CUA’s Unsecured Personal Loan. Making a strong entrance with fixed rates from 9.89% p.a. (10.14% p.a. comparison rate^^), this personal loan gives you the comfort of always knowing your repayment amount. Not to mention, it has loads of flexible features, like the ability to make free extra repayments, use a redraw facility, and to choose between weekly, fortnightly or monthly repayments. What’s more, you’re completely free of any ongoing fees ($175 upfront fee applies).

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RACQ Bank Unsecured Personal Loan
  • Variable rates from 9.54% p.a. (9.83% p.a. comparison rate^^)

  • Free extra repayments

  • No exit or service fee ($200 upfront fee applies)

If you’re a Queenslander looking for an affordable personal loan, then the RACQ Bank Unsecured Personal Loan could be right up your alley. Rates start from a fire 9.54% p.a. (9.83% p.a. comparison rate^^), and are based on your credit score, so borrowers with a clean history could snag a terrific deal for loans of $3,000 up to $60,000. You’ll have the option of making repayments weekly, fortnightly or monthly, and you could even choose to make extra repayments to help pay off your loan faster - without worrying about any exit or service fees!

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Heritage Bank Low Rate Secured Personal Loan
  • Variable rates from 4.69% p.a. (7.16% p.a. comparison rate^)

  • Borrow up to $100,000

  • Free extra repayments & redraw facility

Want to borrow a large sum of money, but still grab a great rate while you’re at it? Well, the Heritage Bank Rate Secured Personal Loan could be worth looking at, as creditworthy borrowers can snatch up ultra-low rates starting from 4.69% p.a. (7.16% p.a. comparison rate^) for loans of up to $100,000. On top of that, you’ll have access to flexible features like free extra repayments and a redraw facility. Just remember, you’ll need to secure the personal loan against a Heritage Bank term deposit with a heap of savings inside - say, a $10,000 deposit for a $10,000 loan. Plus, you’ll need to budget for $5 monthly fee and $200 upfront fee.

^ 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 for the amounts and terms below, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. WARNING: 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. ^ Based on $10,000 over 3 years ^^ Based on $30,000 over 5 years

Keen to hunt down a cheap personal loan that fits your needs? Check out personal loans comparison table to compare even more options and get started on finding a great deal today. 

*Calculations are based on a $10,000 personal loan over 5 years, comparing the interest costs of a loan with the big bank average rate of 13.40% p.a. versus a loan with the customer-owned bank average of 10.99% p.a..

**Data and calculations as of 18 October 2019. 

***The lowest rate among unsecured personal loans from any customer-owned bank in Mozo’s database, as of 18 October 2019, belongs to G&C Mutual Bank’s Fair Rate Personal Loan - AA Rated Borrowers (Variable). Calculations are based on a $10,000 personal loan over 5 years. 

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