Low interest personal loans
Jargon jargon jargon. If this is the first time you've considered taking out a personal loan, then the whole concept might seem a little unfamiliar to you. So allow us to run you through the basics. But there's really only a few main things to consider when securing a low-interest personal loan. Will it be secured or unsecured? Fixed-rate or variable-rate?
If you don't care for frills, bells and whistles, then why not skip right to the point and enquire about a low-interest personal loan? You'll be saving money on features you wouldn't have used anyway, which means you'll also save on time and getting on with making the purchase you need or want.
There are some great low-interest loan products out there if you have collateral to secure your loan. But if you don't, then you could always opt for taking out a credit card instead (depending on the loan amount) because, without security, you're likely to pay 4% higher or more for your loan! Let's explore this a little further.
Start comparing low-interest personal loans below:
Low Interest Personal Loan Comparison Table - page last updated October 17, 2020
Low Rate Personal Loan (Fixed, Unsecured)
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Secured or unsecured personal loan?
With so many low-interest personal loan products out there, it can be tempting to cut through the noise and apply for the first loan you see. But by getting an understanding of the different types of loans available and shopping around first, you could potentially score a much better deal.
For example, before taking out a personal loan, you'll want to first work out whether a secured or an unsecured loan will be best for you. Let's take a look at some of the key differences between the two:
Secured personal loans:
With a secured personal loan, you'll need a car, property or another expensive asset to put up as security against the loan just in case you ever default. This, however, means that you run the risk of losing your asset if you were to default as the lender could then repossess it to pay back the loan.
On the bright side, you’ll generally get more bang for your buck in features and better interest rates with secured loans as there's often more risk involved. If you have collateral to use as security against your loan, lenders will not only look at your application more favourably, but they might even reward you with a lower interest rate too.
Think of collateral as a 'promise' to the lender that you have every intention of paying back what you borrowed. If you don't make your repayments on time every time, then the bank might threaten to take away all or a portion of your security. Sounds fair (ish).
Compare secured personal loans today to explore your options.
Unsecured personal loans:
After some cash to help you visit the places you’ve been dying to see or drive the car of your dreams, but don't have any assets to use as collateral? Then you might opt for an unsecured loan instead.
While you won't risk losing any assets, the downfall of going with an unsecured loan is that they often cost you more in interest for not having any security as a placeholder on your loan. The more you borrow, the more interest you’ll pay and the higher your repayments will be. But if you don’t have any alternative, then it could be your best option.
Compare unsecured personal loans to see what’s out there.
Why should I go for a low-interest personal loan?
Applying for a low-interest personal loan means that your monthly repayments should be less, but you might have fewer features included, such as:
- Extra repayments: The freedom to make extra repayments and pay off your loan faster
- Flexible repayment options: Choice of repayment frequency
- Redraw facility: The ability to redraw on any extra loan repayments you’ve made should you require access to extra funds.
If you don’t care so much about these features, then you might want to focus on securing the best low-interest personal loan instead.
Fixed vs. variable rate low interest loans
What, there’s more? Yep. But no biggie! Remember, we’ve already covered secured vs. unsecured. Once you’ve made a decision about which low-interest loan you’ll start with, then you need to decide whether you want a fixed or variable interest rate.
Here’s the difference between the two:
The beauty of a fixed-rate loan is that it’s predictable. Since the rate doesn’t change with a fixed-rate loan, neither will your regular repayment amount - which means you’ll be able to plan for them.
So, if you like lists, sticking to a budget and knowing exactly where your finances stand on a week to week, month to month, year to year basis… Then a fixed-rate loan could be for you! Bear in mind, you might wind up paying slightly more in repayments in the long run than you would with a variable-rate loan. But that all depends.
If you don’t mind chance playing a part in your repayments, then a variable rate loan could be for you. With a variable loan, there’s no telling whether your interest rate will go up or down. And if the RBA Cash Rate drops, there’s no predicting whether your finance provider will pass on the benefits. Sometimes they do, but often they don’t. Is that a risk you're willing to take?
In saying that, a variable rate has a reputation for saving money in repayments in the long run, but this is the risk of the money game. Ready to play?
When you’re comparing personal loans, don’t just look at the headline interest rate, check the comparison rate too. All personal loan lenders are required to display a comparison rate, A.K.A the headline interest rate plus any fees for the loan.
It’s usually based on a $30,000 loan over 5 years, so if you’re borrowing more or less than this your comparison rate will be different. Mozo displays this rate clearly in all our personal loan tables.
Who should I borrow money from?
Whether you’re new to borrowing or an old player, ignoring your options isn’t always out of choice but more habit. Since bigger banks tend to have bigger marketing budgets at their disposal, they often take centre stage, pushing other smaller lenders to the side. And because people are more familiar with the big four banks they usually go for their products first. But, in doing this you could be missing out on a far better deal elsewhere. Here’s how:
Peer to peer vs. traditional banks
Peer-to-Peer might sound like a strange concept at first, but on closer observation, you’ll quickly realise that it’s got nothing to do with lending money to a mate. Peer-to-Peer (A.K.A ‘online lending platforms’ or ‘P2P’), is a relatively new alternative form of lending which allows you to borrow money from a financial source other than a regular bank.
Quickly becoming a safe and popular alternative to the traditional Big Four banks, most P2P lenders strive to provide a unique service that offers great value for money in terms of competitive rate and flexible terms and condition.
Traditional banks (which were first established what seems to be centuries ago) have the surety of the public as they’ve been trusted members of the community for a very long time. With members often dating back to your forefathers’ generation, the Big Four need to do very little to win the public’s trust - and so many customers become complacent and don’t always look at what else is out there.
Banking alternatives like P2P’s are great to shake things up and keep the lending game fresh instead of just sticking to the same old strategies for the sake of it. Competition in the financial market is what keeps things alive and keeps both the current and next generations’ of savers and investors interested and inspired.
Lower repayments - and then what?
Sure the main benefits to signing up for a low-interest personal loan is hundreds if not thousands of dollars you’ll save in repayments, but are there other features you can benefit from?
Since a low-interest personal loan is designed to be a no-frills option, the features won’t be the same as other standard personal loans. However, shop around, and you’ll see that there are lenders out there who are willing to make their mark and make a difference to the products they offer.
Free extra repayments? Low or no ongoing maintenance fees? Now that’s what we’re talking about. Service is everything, right?
Run a free personal loan comparison to find the right deal with some killer features.
Repayments & comparison calculators
- Personal loan repayments calculator: Wondering how much you can afford to borrow and what kind of repayments you’ll need to make? Check out Mozo's free personal loan repayments calculator which can do all the maths for you.
- Personal loan comparison calculator: Use Mozo’s personal loan comparison calculator to compare the rates and fees of two loans to see which one suits your needs better. Will a loan with a higher upfront fee but lower interest rate cost you less than a loan with a low fee but higher interest rate?
Low interest personal loan tips & traps
You’d think that a ‘low-interest loan’ would be just that, right? Well, not always. As you do your research, you’ll see that the privilege of securing a low-interest personal loan can sometimes (not always though) mean a whole heap of fees and charges before you even receive your loan amount.
Take it from Mozo and shop around! Crossing the T’s and dotting the I’s is never a waste of time - after all, a loan, no matter how small or large is a big financial commitment.
What to watch out for in a low-interest personal loan:
As we’ve mentioned, one of the common tips and traps of securing a low-interest personal loan can be higher fees. Here are some other factors to consider before putting pen to paper:
- Do you want to pay your loan off faster? If so, does the loan allow extra repayments?
- Does the advertised rate match the rate offered?
- How tough are the penalties for missing or making a late repayment? You don’t want to add to what you already owe, right?
- If using your home as security, could you lose your house if you don’t meet your repayments?
- If you’re looking into an online lender or P2P do you know how safe/reputable they are?
- Have you read any customer reviews? Reviews are super useful. Reading up on other people's personal experience can give you first-hand insight into what works on a real and practical level, not just on paper. You can read personal loan reviews on Mozo.
If anything from this checklist remains unanswered or you're still confused about certain aspects of your loan, don’t sign anything! Make sure you make an informed decision before securing a loan.
Making a rash decision means you could be signing up for something more than just a low-interest personal loan. No risk is not worth taking unless you know exactly what you’re in for.
Here's a scenario:
Sarah wants to borrow $15,000 to go toward her engagement party. She wants to compare a range of products quickly and in one easy place, so she visits Mozo’s personal loans section.
Here, Sarah reviews a bunch of low interest personal loans before quickly applying online. Here's what she found:
Secured vs. unsecured loan:
Since Sarah wants to borrow money with an unsecured personal loan, she realises her repayments will be higher than if she went for a secured personal loan. But, as she wants the best engagement party she can afford, Sarah’s willing to make the sacrifice and pay a little more toward the event.
P2P vs. conventional lender:
Of all the providers Sarah looked at, people-powered P2P lender Society One came out on top with the best deal to suit her budget. On a 3-year unsecured term, Sarah’s expected monthly repayments sit at $476 with no more to pay. At 8.95% p.a. it’s comparative to a lot of credit cards, and also gives her the freedom to make free additional repayments. Power to the people!
Apply online with ease:
Sarah’s super busy working full-time and barely has any time to organise her engagement party. So eliminating the need to queue up at a bank for a single quote when she could get multiple at once online seems like a waste of time. By applying online Sarah can get on with everything else and stay on top of her short term goals.
By conducting her online search Sarah was surprised to see that many financial providers now offer low entry or no establishment fees - and many products charge no maintenance fees for the length of the loan.
Moral of the story: Never just sign up for the first deal that catches your eye! Always shop around until you find the best deal for you and your budget.
Low rate personal loan checklist
In a hurry? If you’re bookmarking this page for later, this checklist is great for a glance-over. Here you can quickly check what a low interest personal loan may entail, fast!
- Can I afford repayments? Remember to consider daily expenses like food, rent, car repayments, petrol and emergency costs (like dental fees) before taking out a loan. Use Mozo’s lightning-fast personal loan repayments calculator to see if you can budget in a loan.
- Is my credit rating good? If you’re usually on time with paying your utility and credit card bills, then chances are your credit rating is ok. If you’re not sure what your credit score is, visit this site and see for yourself.
- Do I have everything I need to apply for a low-interest loan? Do you have proof of your income? And we don’t mean the last few payslips. A financial provider will prefer last year’s tax return to really net your worth. If this isn’t possible, then you may want to wait until you lodge your next tax return or approach a broker on how they can tailor a loan to your needs and income.
- How long does it take to apply for a loan? Some banks will give you approval in the morning and deliver the funds to your account by the afternoon. Others will take a little longer. It really depends, so if time is a big deciding factor for you then do your research to find out who’ll likely provide you with the quickest outcome. That being said, don’t leave it to the last minute to apply for a loan.
- Read. The. Small. Print. Yes! Because even a low-interest personal loan can mean big risks if you don't know what you're signing up for. Not every consultant will take the time to step you through your application and inform you of all the traps - so make sure you take the initiative and responsibility of doing some yourself.
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