Fixed rate personal loans
Are you a bit of a worry wart? Someone who likes to stick to a budget? Change doesn’t sit so well with you? If this is all sounding a little like you then a fixed rate personal loan may suit you just right. A fixed rate means the interest rate will remain the same throughout the loan term. So when market interest rates rise and fall your loan will not be affected. You have the security of knowing exactly what you’ll have to make in repayments each month.
Start comparing fixed rate personal loans below.
Fixed Rate Personal Loan Comparison Table - last updated December 05, 2020
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Miss Jones has been putting in the hard yards at work, doing over time to earn extra cash so she can head to Hawaii for her friend’s wedding. Unfortunately she’s just come to the realisation she won’t have enough savings to cover all the expenses of the holiday. She doesn’t want to miss seeing her friend walk down the aisle so Miss Jones has decided to take out a personal loan to help fund the trip. With a little finance knowledge under her belt, Miss Jones is pretty certain she wants the interest rate on her loan to be fixed but to be sure, she does a little research into the advantages and disadvantages of a fixed rate personal loan. Here’s what she learnt.
What are the pros and cons of a fixed rate loan?
Advantages of a fixed rate loan:
- Repayments will remain the same throughout the loan term, making budgeting a whole lot easier
- When those market interest rates rise, you don’t need to stress, your loan will not take a hit
Disadvantages of a fixed rate loan:
- Rates and fees are generally higher compared to a variable rate personal loan
- If you want to pay off the loan before the term has ended you’re likely to be hit with a fee
- Extra repayments may be capped or not available
Being a bit of a control freak when it comes to finances, Miss Jones has decided to stick with a fixed rate personal loan. She wants the repayments on the loan to remain the same each month, that way it will help her budget over the three year term. Being a pessimist, she doesn’t think she’ll win lotto or get a work bonus to pay off the loan any quicker!
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Secured vs unsecured
Having decided on a fixed rate, Miss Jones is now umming and ahhing about whether or not to secure the loan? The decision isn’t too hard, Miss Jones is a greenie and doesn’t have a car (she rides a pushbike) nor does she own a house, so a secured loan is really out of the question, she doesn’t have any assets to put up as collateral against the loan. She only wants to borrow around $10,000 and pay it back over three years, so an unsecured loan suits just fine!
Compare personal loans to find out which is the better offer.
Fixed loan alternatives:
To fix or not to fix? That’s one of the questions on everyone’s lips when taking out a personal loan. We’ve gone into detail the concept of a fixed rate personal loan but if this doesn’t sound like a good mould for your financial situation then there’s always the option of a variable rate personal loan.
With a variable rate personal loan the interest rate will change during the term of the loan according to the rise and fall of market interest rates.
James is planning on popping the question next month to his girlfriend, he knows the sparkling diamond won’t be cheap nor will the wedding itself. With only a few thousand dollars sitting in his savings account James wants to take out a personal loan to cover the wedding expenses. With a work bonus looking likely James is going to take out a variable rate personal loan, so he can avoid any charges for paying off his debt early. James also wants flexibility with the loan and is keen to keep fees and charges to a minimal.
Have a read of our guide on wedding loans!
Features of a fixed rate loan
Flexible Repayment Frequency: A lot of providers will let you choose whether you want make your repayments, weekly, fortnightly or monthly.
Additional repayments: You can make extra repayments to get out of debt quicker but be aware some lenders like the big banks may hit you with fees and charges!
Redraw facility: Once you've paid off a portion of your loan, you can draw that money back out again. This feature may be handy to have when an unexpected bill or health issue pops up.
Online application: Apply for a fixed rate personal loan from the comfort of your own home.
Deciding on a loan term and repayment frequency
The term of the loan refers to period you have to repay the lender the money you have borrowed. The duration will depend on your purpose of the personal loan and your financial situation. Personal loan terms usually range from 1 to 10 years. The longer the term of the loan, the more you will pay in interest and fees. So sit down and look at your budget to help decide what loan term suits you.
The advantage of locking in a fixed rate personal loan is knowing exactly what your repayments will be. You can choose to make your repayments weekly, fortnightly or monthly. Setting up your repayments to coincide with your work pay is a good idea. Use the Mozo personal loan repayment calculator.
Who offers fixed rate personal loans?
- Banks: Australia’s big 4 banks - the Commonwealth Bank, Westpac, ANZ and NAB all offer fixed rate personal loans as do other big banks such as Suncorp, ING DIRECT and Bankwest
- Credit Unions: These are non-profit financial institutions with fees and rates usually lower than the big banks
- Peer to peer lenders: This is a way for investors to connect with borrowers. The loans are usually unsecured with fixed interest rates and low fees.
Read about the pros and cons of personal loan providers.
Loan Application checklist
- Proof of identification: Some lenders require two forms of ID e.g. drivers licence, passport, birth certificate or Medicare card
- Proof of income: You will need to provide several of your most recent payslips. Or if you are self-employed some lenders will ask for your last two years’ tax return/financial statement and your last Tax Assessment Notice.
- Financial details: You’ll have to provide documents of any assets, debts, credit cards and savings you might have.
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