Top personal loan myths busted

By Kelly Emmerton · · 3 min read
Fact Checked
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A personal loan can be a handy and cost-effective way to achieve big milestones in your life, like buying your first car or renovating your home, not to mention extremely useful for consolidating existing debt or establishing a good credit history.

But not all personal loans are created equal and this handy financial tool is often misunderstood. So to put your mind at ease, Mozo Director Kirsty Lamont has put to bed four of the top myths around personal loans.

MYTH 1. Your bank is the best place to start

Approaching your current bank might seem like the easiest way to apply for a personal loan, but it doesn’t guarantee you the lowest interest rate. According to the Mozo database, personal loan rates range from under 10% to a whopping 17.57%. What are the chances that your bank offers the best deal?

“There is so much choice when it comes to applying for a personal loan, which is why it’s a great idea to start by using a personal loan comparison tool, so you can be confident that you’re aiming for the best value offer around. Plus, even if you do wind up back at your current bank, comparing interest rates first gives you some ammunition to start haggling for a better deal,” says Lamont.

Hot personal loan rates right now

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 247 personal loans.
Last updated 27 July 2024 Important disclosures and comparison rate warning*
  • Mozo Expert Choice Badge
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    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^'

    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.

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    Details
  • Mozo Expert Choice Badge
    Low Rate Personal Loan

    Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.48% p.a.
    7.19% p.a.to 8.84% p.a.based on $30,000
    over 5 years

    Competitive 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.

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    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.55% p.a.to 24.98% 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 5.76% would cost $35,173.52 including fees.

    Compare
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    Details
  • Holiday Loan

    Excellent Credit

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 8.48% p.a.
    7.19% p.a.to 8.84% p.a.based on $30,000
    over 5 years

    Travel the globe with competitive 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 award for 2024 ^. 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.

    Compare
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    Details
  • Express Personal Loan

    Secured

    interest rate
    comparison rate
    Monthly repayment
    14.95% p.a.to 27.95% p.a.
    29.30% p.a.to 42.8% p.a.based on $10,000
    over 3 years

    Access fast finance on loans from $3,000 to $25,000 with a Jacaranda Finance Personal Loan. Terms from 25-48 months. Check if you qualify with no impact on your credit score. Enjoy a speedy, online approval.

    Repayment terms from 2 years to 4 years. Representative example: a 3 year $10,000 loan at 14.95% would cost $14,324.71 including fees.

    Compare
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    Details
  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    6.57% p.a.to 18.99% p.a.
    7.19% p.a.to 19.39% p.a.based on $30,000
    over 5 years

    Competitive 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.

    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.

    Compare
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    Details
  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.57% p.a.to 24.99% p.a.based on $30,000
    over 5 years

    Roll 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.

    Compare
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    Details

MYTH 2. Banks are the only trustworthy lenders

“The big banks would probably like you to believe this one! But the truth is, there are a wide variety of trustworthy lenders out there, and often the best interest rates are found outside traditional banks,” says Lamont.

In Australia, any credit provider - including banks, mutuals, credit unions, peer-to-peer lenders and online fintech platforms - must be registered and regulated by ASIC. Under these regulations, the lender must practice responsible lending, which includes ensuring the loan you apply for is suitable for you and your financial situation.

MYTH 3. Applying for a personal loan hurts your credit score

Simply putting in an application for a personal loan shouldn’t impact your credit history at all, since at that point, you don’t actually have access to any credit. In fact, applying for a personal loan and then meeting your repayments faithfully is one way to start building up a positive credit report.

One thing that can send up a red flag is applying for multiple personal loans all at once, which is why it’s a good idea to compare your options first and then only put in an application for your top choices.

MYTH 4. Personal loan interest rates are unfairly high

Nobody wants to get stuck paying a heap of interest - the good news is, there are heaps of personal loans on the market with really competitive interest rates.

This myth might spring from the fact that personal loan rates are 5.32% higher than home loan rates on average. This is because personal loans are repaid over a much shorter timeframe than a mortgage. But look at it this way - the average personal loan rate is 7.43% lower than your typical credit card rate!*

To score a great rate on your personal loan, all you need to do is know where to look. To get you started, you can check out some super competitive personal loans in our comparison table.

*Based on average rate for P&I $300,000 home loan over 30 years with 80 LVR(4.35%), and average rate for $30,000 personal loan over 5 years (9.67%) and average credit card rate of 17.10%.

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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.

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