Mozo guides

Fixed rate personal loans

clock and money ball representing fixed loans balanced on a single finger

Ever wondered what difference choosing between a variable and fixed rate personal loan really makes? If you're a little more cautious or have trouble adjusting to change, a fixed rate loan could be just what you need. 

Let’s walk through everything you need to know about fixed rate personal loans. 

What is a fixed rate loan?

A fixed rate means the interest rate will remain the same throughout the loan term. No matter what's happening in the market at large, rise or fall, your loan won’t be affected. So this is really dependent on where the Reserve Bank of Australia’s cash rate is. 

Regardless, you have the certainty of knowing exactly what your repayments will be for the life of the loan.

What are the pros and cons of a fixed rate loan?

If you’re considering a fixed rate loan, then it's important to weigh up both the advantages and disadvantages. 

The pros of choosing a fixed rate loan include:

  • Predictable budgeting: With fixed repayments throughout your loan term, you can plan your budget while knowing exactly how much to set aside each month which is helpful for long term planning.
  • Protecting against rate increases: When market interest rates rise, your fixed rate loan payments remain unchanged, saving money during periods of rising rates. This shield against market volatility can be especially valuable in uncertain economic environments.
  • Simplified financial management: The consistency of your repayments makes it easier to track and manage your loan, reducing the mental load of adjusting to payment changes that come with variable rate loans.

However, fixed rate loans also come with some cons:

  • Generally higher initial rates: Fixed rate loans typically start with slightly higher interest rates compared to variable rate options, as you're paying a premium for the security of rate stability.
  • Limited flexibility: Many fixed rate loans come with restrictions or fees for making extra repayments or paying off the loan early, potentially limiting your ability to take advantage of windfalls or salary increases.
  • Missing out on rate decreases: If market interest rates fall, your repayments won't decrease, meaning you could end up paying more than necessary during periods of declining rates.

However, the reality of your money situation can influence the type of personal loan you choose. For instance, if you're on a strict budget or fixed income, the predictability of fixed repayments might outweigh the potential benefits of a lower variable rate.

Choosing between fixed and variable rates

The deciding between fixed and variable rates often comes down to your circumstances and risk tolerance. Fixed rates offer certainty and a level of stability, which is better if you prefer predictable expenses or are concerned about future rate increases.

Variable rate personal loans, on the other hand, offer more flexibility and potentially lower initial rates, but come with the uncertainty of changing repayments. That’s why you should be aware of your financial goals, budget flexibility, and market expectations when making a choice between these loan types.

The application process

Getting a fixed rate personal loan involves careful preparation and understanding of the requirements. Here's what you need to know about applying for your loan:

Required documentation:

  • Valid identification (driver's licence, passport, birth certificate or Medicare card)
  • Proof of income (recent payslips or tax returns for self-employed applicants)
  • Bank statements and financial records
  • Details of assets, debts, credit cards, and savings

The typical application process follows these steps:

  1. Research and compare loan options from different lenders
  2. Gather all required documentation
  3. Submit your application (online or in-person)
  4. Undergo credit assessment and verification
  5. Review and accept loan offer
  6. Receive funds and commence repayments

Finding a lender

There are a few different options for fixed rate personal loan lenders. Some of the providers include:

  • Big 4 banks: Australia's big 4 banks - Commonwealth Bank, ANZ, NAB, and Westpac.
  • Other banks: Will often offer lower rates and low fees than the big banks. 
  • Credit unions/mutual banks: Often lower fees and rates, though services may be more limited. 
  • Peer to peer lenders: These platforms connect borrowers with investors so they tend to offer low fees and rates.

When comparing lenders, look beyond interest rates and things such as fees, features, and service accessibility. Use the personal loan comparison calculator to get an idea of the total cost of different loan options.

If you’re ready to get started, head over to our personal loan hub page and compare both fixed and variable rate providers today! 

JP Pelosi
JP Pelosi
RG146
Managing editor

Managing Editor Jean-Paul (JP) Pelosi leads the editorial team, with over 20 years of experience writing for top outlets like The Guardian, The Sydney Morning Herald and News.com.au. JP's expertise in home loans and property is complemented by his rich background at major financial firms including CommBank, Suncorp and Amex. Holding a Master's in Communications and international experience in journalism, JP combines passion with skill and has a unique ability to apply this editorial experience and financial knowledge to advise the team on how to create engaging financial content for Australian consumers.


* 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.

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