Gone are the days when Aussies would only borrow through the big banks, as today there are a great range of lenders from credit unions through to peer to peer players offering personal loans with competitive rates, fees and features.
So if you want a full rundown on the who’s who of the personal loan world, simply read our roundup below.
In Australia there are four major banks that provide personal loans to Australians. Here’s a bit of background info about each:
This major player has a history dating back to 1912 and today is Australia’s largest bank. Under its umbrella includes Bankwest, the wealth management service Colonial First State and online broking service CommSec. When it comes to personal loans, CommBank offers both variable and fixed interest rates, as well as a personal loan specifically designed for students dubbed the Student Unsecured Personal Loan.
Launching in Melbourne in the 1830s, another seasoned bank is the Australia and New Zealand Banking Group. While it’s the third largest bank in Australia, it tops the earnings list in New Zealand. Today ANZ services more than 6 million Australians providing banking products across home loans, credit cards and savings accounts. With ANZ’s personal loans, you can choose between its Unsecured Personal Loan (Fixed) or Unsecured Personal Loan (Variable).
ANZ might be old, but Westpac takes the cake opening its doors in 1817 under the name of the Bank of New South Wales. Westpac owns a range of companies including St. George, Bank of Melbourne, BankSA and RAMS. If you want to take out a personal loan through Westpac you can choose between either its variable rate Personal Flexi Loan or its fixed rate Personal Loan and there’s also a student friendly loan available.
The National Australia Bank has a reach that stretches beyond just Australia, providing financial solutions in New Zealand, Asia, the United Kingdom and the United States. Under its ownership belt include the brands of MLC, Bank of New Zealand, Yorkshire Bank and Great Western Bank. If you decide that NAB is your borrowing match, you can choose between its Personal Loan (Fixed Unsecured) or NAB Personal Loan (Variable, Unsecured).
Apart from the big four players, there are also a range of personal loan providers that also fall under the “major” category, including...
As mentioned above, St. George is part of the Westpac group and today services over 2.6 million customers making it one of Australia’s major financial providers. There’s plenty of choice when it comes to its personal loan options, such as secured or unsecured personal loans that come with either a variable or fixed rate. You can compare St. George’s personal loan products here.
Based in Victoria, the Bank of Melbourne has branches across Melbourne Central, Fitzroy, Richmond and Point Cook. It’s also another personal loan provider to be owned by Westpac. For those looking to borrow a large amount, the Bank of Melbourne has the Get Set Loan with a borrowing limit of $50,000 and there’s also secured and unsecured personal loan options available.
Another major lender to be owned by one of the big four is Bankwest, falling under the Commonwealth Bank umbrella. Bankwest’s history stretches back 120 years originally named the Agricultural Bank of Western Australia and didn’t become Bankwest until 1994. There are two main personal loan offerings from this major - the Bankwest Flexible Personal Loan or the Unsecured Personal Loan (both with a borrowing limit of $50k).
There are several reasons you may want to take out a personal loan through a major bank.
Branch access: Most major banks have a larger number of branches located throughout Australia, which could be an important consideration if you would like to speak to a branch manager face to face about your personal loan options.
Bundling: If you’re willing to bring over your other banking products when applying for a personal loan through a big bank - e.g savings account, bank account and or credit card - then the major bank may offer you a better deal in the form of a lower rate and fees.
Higher borrowing amounts: Unlike smaller online lenders like credit unions and peer to peer providers, major banks usually offer borrowing limits that extend far beyond the $30,000 threshold, with some even reaching up to $100,000.
There is one major downside of borrowing from a big bank...
Higher rates and fees: Big banks have extremely high overheads, such as the cost of paying dividends to shareholders and paying for brick and mortar branches, as well as face to face staff. So to cover these costs and of course to make a profit, if you take out a loan through a major you are likely to be charged a higher interest rate and fees which could cost you thousands of dollars extra over the life of the loan.
Do you like the thought of a bank owned by its customers? Then a credit union, mutual or building society could be a good borrowing option for you. Let’s start by running through some of the well known customer owned lenders downunder:
With more than 345,000 members in Australia and 50 branches and 6 advice centres scattered across the country, People’s Choice is one of the biggest credit unions downunder. You can choose between either a secured or unsecured loan, which both come with a fixed interest rate.
Another large customer owner bank is QANTAS Credit Union with 90,000 members. The credit union was originally launched in 1959, by Qantas employees with the aim of passing on better interest rates and lower fees to members. Today, when taking a personal loan out through QANTAS Credit Union, there’s either the Special Secured Loan (Variable) or Unsecured Personal Loan (Variable) .
Dating back 70 years, the Greater Building Society provides financial solutions to over 250,000 customers and offers the largest ATM network of any building society in Australia with over 3000 ATM’s located throughout the country. Like most of the other customer owned banks Greater Building Society also lets you choose between a secured or an unsecured loan.
Competitive personal loan deals: As credit unions, mutuals and building societies are customer owned, you’re likely to score a far better deal than if you were to take out a personal loan through a big bank. Rather than passing profits to shareholders, customer owned banks return profits to customers in the form of lower rates and fees.
Membership fee: Before you’re approved for a loan through a credit union or mutual, you’ll need to pay a membership fee. But thankfully this usually isn’t too dear, sitting at around the $10 mark.
A fairly new type of provider to the personal loan scene is peer to peer lenders, or P2P for short. The traditional concept of peer to peer is when an investor lends directly to a borrower, removing the middle man of the banks from the borrowing scenario. Here are the peer to peer players offering competitive personal loan deals:
As the first peer to peer player to launch in Australia in 2012, SocietyOne is backed by a range of large businesses including Consolidated Press Holdings and News Corp, plus Westpac is an investor. Its Unsecured Personal Loan, offers one of the lowest interest rates in the personal loan market for those with an AA credit rating (e.g a high credit score).
Another peer to peer provider that is shaking up the personal loan world is DirectMoney, who launched in Australia in 2014. It also provides an unsecured personal loan option with a competitive interest rate for borrowers with a good credit rating. Its Personal Loan comes with a fixed interest rate, meaning your rate will be locked in for the life of the loan.
This peer to peer player comes from the UK and was also launched in Australia in 2014. It’s the only P2P lender to offer a secured option to borrowers, which means you can put up an asset such as your car as security for the loan. RateSetter also has an unsecured option available.
Competitive personal loan deals: Peer to peer lenders run their personal loan services entirely online. So without the cost of bricks and mortars branches, they are able to pass on better interest rates and lower fees to customers. Over the life of the loan this could save you hundreds, if not thousands of dollars.
Joining the social movement: The idea of “peer to peer” is all about strangers helping strangers e.g house swapping, car sharing (the list goes on!). So if you like the idea of removing the middleman and borrowing directly from investors then taking out a personal loan through a peer to peer lender could be for you.
No branch access: Peer to peer lenders run their businesses entirely online, so if you take out a personal loan through a P2P provider, you’ll need to be completely comfortable with organising your personal loan online or over the phone.
Tier based interest rates: Another thing to be mindful of is P2P lenders use tier based interest rate pricing systems, which means the better your credit rating the better your interest rate and of course the worse your credit rating the higher your rate. So only apply for one of these lenders if you know your credit report is in a good shape. Find out how you can get a free copy here.
Before you decide on a personal loan provider it’s a wise idea to read reviews from customers just like you to get an idea on how they rate on everything from customer service to convenience.