Open banking and how it could affect your personal loan application
The Aussie banking industry recently introduced ‘open banking’, a new style of banking that puts customers in control of their data.
Whether you are on the hunt for a new home loan, personal loan or credit card - or are looking to refinance - open banking should make it simpler to find better deals between banks.
First, what is open banking?
Open banking gives Aussie customers control over their banking information. It allows you to ask your current bank to share your data, such as your transaction or savings account information with other banks and lenders whenever you want.
Ultimately, you are able to say where your data is going instead of your bank controlling it. This makes it easier for you to compare deals between banks and make the switch to more competitive banking products if you want to.
However, open banking is not in its full form just yet. Here’s a breakdown:
- From 1 July, 2020 big four customers can advise their banks to share their credit card, debit card, deposit account and transaction account data under Consumer Data Right (CDR).
- From November 2020 Aussie customers can request that banks share their mortgage and personal loan data.
- From February 2021 non big four customers can request to share their product, account and transaction data for home loan products.
- From July 2021 all Aussie banks must provide access to customers’ product, account and transaction data for personal loan and other banking products.
How open banking impacts personal loan applications
When you approach a personal loan lender outside of your current bank, it is likely that they will want to see more than just your credit report.
Previously, customers may have been required to provide potential lenders with their banking login details, allowing them to review things like transaction history.
Mozo money expert, Peter Marshall says this was a concern for many Aussie consumers. He says that open banking is a more secure option.
“I think the biggest benefit [of open banking] is the security issue,” Marshall says. “More and more lenders want to look at your bank account to see your transactions and check that you are getting paid what you say you’re getting paid, and that you don’t have any large regular expenses that you may not have mentioned on your application.”
He explains that it’s about lenders being able to do better due diligence when it comes to your application without potentially compromising your banking login details.
Will open banking determine the interest rate I get?
With the growing popularity of risk-based pricing and personalised interest rates amongst Aussie lenders, open banking provides a clearer picture.
“Risk-based pricing can be as simple as looking at your credit score but it can also bring in other factors such as your spending habits which would be more apparent through giving someone full access to your transaction history,” Marshall says.
But these assessments aren’t about lenders naming and shaming you for spending too much online shopping. Rather, it looks at your situation as a whole.
“It helps the bank make a more informed assessment of your living expenses, more than flagging specific transactions,” Marshall says.
Digital marketing manager at online personal loan lender Wisr, Audrey Neale says that the company’s risk-based pricing model takes into account multiple factors including credit score.
“Wisr's credit assessment process establishes a credit risk profile for each applicant. The credit risk profile is used to determine which band the applicant is assigned, and which interest rate is offered,” she explains.
“If you’ve demonstrated good financial behaviour and have a strong credit score it may pay off with a great rate. If you have a lower credit rating and meet our lending criteria, you will still get a fair deal and benefit from no ongoing, early repayment or exit fees.”
Is open banking safe?
Essentially, open banking is designed to put you in control of your banking data, so you can select who has access to it and who doesn’t.
“You always have to opt in, you always have to give very specific permissions, it’s very tightly controlled to minimise the risk of someone ending up with your information when they shouldn’t have it,” Marshall says.
“There’s only one accredited third party data recipient right now and they've been working on it since the beginning. They’ve done a lot of work to ensure that people can trust it.”
RELATED ARTICLE: How a risk-based personal loan could benefit you
Want to kick-start your hunt for the personal loan for you? Take a look at the great options below or jump over to our personal loan comparison table.
Compare Personal Loans 2020 - last updated 18 April 2024
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Mozo experts choice awards won:
- Excellent Credit Unsecured Personal Loan - 2024
Unsecured Personal Loan
Fixed
interest rate
comparison rate
Monthly repayment6.75% p.a.to 26.95% p.a.6.75% p.a.to 26.95% p.a.based on $30,000
over 5 yearsBorrow 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^'
Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.
CompareCompare- interest rate
- 6.75% p.a.to 26.95% p.a.
- comparison rate
- 6.75% p.a.to 26.95% p.a.based on $30,000
over 5 years
- interest rate
- 6.75% p.a.to 26.95% p.a.
- comparison rate
- 6.75% p.a.to 26.95% p.a.based on $30,000
over 5 years
- Upfront fee
- $0.00
- Monthly fee
- $0.00
- Exit fee
- $0.00
- Late payment fee
- $0.00
- Repayment options
- Weekly, Fortnightly
- Early repayment penalty
- 0
- Minimum loan amount
- $5,000.00
- Maximum loan amount
- $50,000.00
- Minimum loan term
- 2 Years
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- Eligible customers who apply and settle by 1 March 2024 can receive a gift card of up to $200 depending on the amount borrowed. Choice of gift card from Bunnings, Red Balloon, Supercheap Auto and Webjet.
- Other restrictions
- Rates based on borrower with excellent credit score. Maximum 3 year term for loan amounts $8,000 or less.
Read our Mozo Review to learn more about the NOW Finance Unsecured Personal Loan
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Unsecured Personal Loan
Fixed
interest rate
comparison rate
Monthly repayment5.76% p.a.to 24.03% p.a.6.55% p.a.to 24.98% p.a.based on $30,000
over 5 yearsFast, 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 5.76% would cost $35,173.52 including fees.
CompareCompare- interest rate
- 5.76% p.a.to 24.03% p.a.
- comparison rate
- 6.55% p.a.to 24.98% p.a.based on $30,000
over 5 years
- interest rate
- 5.76% p.a.to 24.03% p.a.
- comparison rate
- 6.55% p.a.to 24.98% p.a.based on $30,000
over 5 years
- Upfront fee
- $575.00
- Monthly fee
- $0.00
- Exit fee
- $0.00
- Late payment fee
- $15.00
- Repayment options
- Weekly, Fortnightly, Monthly
- Early repayment penalty
- $0.00
- Minimum loan amount
- $2,000.00
- Maximum loan amount
- $70,000.00
- Minimum loan term
- 3 Years
- Maximum loan term
- 7 Years
- Security required
- Unsecured
- Other benefits
- Establishment fee is $275 for loans under $5,000.
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- Establishment fee is added to the loan amount and interest is charged on the total amount.
Read our Mozo Review to learn more about the Harmoney Unsecured Personal Loan
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Featured Product
Mozo experts choice awards won:
- Excellent Credit Unsecured Personal Loan - 2024
Low Rate Personal Loan
Excellent Credit
interest rate
comparison rate
Monthly repayment6.57% p.a.to 8.48% p.a.7.19% p.a.to 8.84% p.a.based on $30,000
over 5 yearsCompetitive low rates for borrowers with excellent credit on 1-7 year loans from $2,001 up to $75,000, plus free extra repayments. 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.
Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 6.57% would cost $35,528.12 including fees.
CompareCompare- interest rate
- 6.57% p.a.to 8.48% p.a.
- comparison rate
- 7.19% p.a.to 8.84% p.a.based on $30,000
over 5 years
- interest rate
- 6.57% p.a.to 8.48% p.a.
- comparison rate
- 7.19% p.a.to 8.84% p.a.based on $30,000
over 5 years
- Upfront fee
- $250.00
- Monthly fee
- $0.00
- Exit fee
- $0.00
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- $35.00
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- Weekly, Fortnightly, Monthly
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- $0.00
- Minimum loan amount
- $2,001.00
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- $75,000.00
- Minimum loan term
- 1 Year
- Maximum loan term
- 7 Years
- Security required
- Unsecured
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- -
- Other restrictions
- Rate for Excellent Credit. Establishment fee varies from $250 and is based on your OurMoneyMarket loan grade and total loan amount. The fee is added to the principal amount and paid over the loan term.
Read our Mozo Review to learn more about the OurMoneyMarket Low Rate Personal Loan
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Express Personal Loan
Secured
interest rate
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Monthly repayment14.95% p.a.to 27.95% p.a.29.30% p.a.to 42.8% p.a.based on $10,000
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CompareCompare- interest rate
- 14.95% p.a.to 27.95% p.a.
- comparison rate
- 29.30% p.a.to 42.8% p.a.based on $10,000
over 3 years
- interest rate
- 14.95% p.a.to 27.95% p.a.
- comparison rate
- 29.30% p.a.to 42.8% p.a.based on $10,000
over 3 years
- Upfront fee
- $990.00
- Monthly fee
- $24.00
- Exit fee
- $0.00
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- $35.00
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- Weekly, Fortnightly, Monthly
- Early repayment penalty
- 0
- Minimum loan amount
- $5,000.00
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- $25,000.00
- Minimum loan term
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- -
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- Application fee from $475 to $990. Additional Risk Fee of $0 to $995 applies.
Read our Mozo Review to learn more about the Jacaranda Finance Express Personal Loan
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Debt Consolidation Loan
interest rate
comparison rate
Monthly repayment6.57% p.a.to 18.99% p.a.7.19% p.a.to 19.39% p.a.based on $30,000
over 5 yearsCompetitive fixed rates on loans up to $75,000 depending on your credit score. Zero monthly account keeping fees, no exit fees and no early repayment fees. Make weekly, fortnightly or monthly repayments, over 1 to 7 years managed entirely online, at any time. Fast and easy, 100% online application.
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CompareCompare- interest rate
- 6.57% p.a.to 18.99% p.a.
- comparison rate
- 7.19% p.a.to 19.39% p.a.based on $30,000
over 5 years
- interest rate
- 6.57% p.a.to 18.99% p.a.
- comparison rate
- 7.19% p.a.to 19.39% p.a.based on $30,000
over 5 years
- Upfront fee
- $250.00
- Monthly fee
- $0.00
- Exit fee
- $0.00
- Late payment fee
- $35.00
- Repayment options
- Weekly, Fortnightly, Monthly
- Early repayment penalty
- -
- Minimum loan amount
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- Maximum loan amount
- $75,000.00
- Minimum loan term
- 1 Year
- Maximum loan term
- 7 Years
- Security required
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- -
- Other restrictions
- Upfront fees from $250.
-
Debt Consolidation Loan
interest rate
comparison rate
Monthly repayment5.76% p.a.to 24.03% p.a.6.57% p.a.to 24.99% p.a.based on $30,000
over 5 yearsRoll multiple debts into one loan to streamline your finances with one set of repayments and one interest rate. Competitive fixed interest rates with no monthly or early repayment fees and flexible repayment options. Easy online application and funding in as little as 24 hours (subject to approval).
Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.
CompareCompare- interest rate
- 5.76% p.a.to 24.03% p.a.
- comparison rate
- 6.57% p.a.to 24.99% p.a.based on $30,000
over 5 years
- interest rate
- 5.76% p.a.to 24.03% p.a.
- comparison rate
- 6.57% p.a.to 24.99% p.a.based on $30,000
over 5 years
- Upfront fee
- $575.00
- Monthly fee
- $0.00
- Exit fee
- $0.00
- Late payment fee
- $15.00
- Repayment options
- Weekly, Fortnightly, Monthly
- Early repayment penalty
- 0
- Minimum loan amount
- $2,000.00
- Maximum loan amount
- $70,000.00
- Minimum loan term
- 3 Years
- Maximum loan term
- 7 Years
- Security required
- Unsecured
- Other benefits
- Establishment fee is $275 for loans under $5,000.
- Other restrictions
- -
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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
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