A personal loan is when you borrow money from a lender that must be repaid with interest in regular instalments over a set period, usually between three and five years. Personal loans can be used to buy cars, consolidate debt, pay for holidays and other larger expenses.
Many personal loans will allow you to borrow between $1,000 and $50,000. In some cases, you may be able to borrow up to $100,000. 

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What can I use a personal loan for?

How do personal loans work?

After your personal loan application has been approved, you'll usually receive the money as one lump sum. You’ll need to pay this money back, plus interest, over the term of your loan. 

The main steps to get a personal loan are:

  1. Application: When you apply for a personal loan, you'll need to show proof of income, bank statements and personal identification. If you’re applying for a secured loan, you’ll also need to provide details of your security asset.
  2. Assessment: The lender will look at your personal finances to work out if you can afford the loan.
  3. Credit check: Responsible Australian lenders perform credit checks whenever someone applies for a loan. These checks help lenders work out if you’re a responsible borrower. They may also help determine your personalised interest rate.
  4. Contract: Once your application has been approved, you’ll be asked to sign a personal loan contract. This confirms the length of your loan, the type of loan, and that you understand the fees involved.
  5. Repayment: Some personal loans will let you choose weekly, fortnightly or monthly repayments, to better suit your budget.

What types of personal loans are available?

Not every type of personal loan will suit your specific financial situation. Here is a table to help you understand the pros and cons of each type of personal loan before deciding which one to sign up for. 

Type of personal loan What to consider
Fixed rate personal loan
  • Good for budgeting - stable payments from month to month
  • No risk of repayments increasing due to interest rate rises
  • May miss out on savings from interest rate cuts
Variable rate personal loan
  • Tend to be more flexible
  • You can save money if interest rates fall
  • Repayments may increase if interest rates rise
Secured personal loan
  • Often lower interest rates
  • Seen as a lower risk to lenders as an asset is used as security against the loan
  • May allow you to borrow more money
  • For car loans - lender may only accept new models as security
Unsecured personal loan
  • Don’t risk losing your security if you default
  • Application can be simpler
  • May mean higher interest rates and/or a smaller loan amount than a secured loan

What fees are involved with personal loans?

A personal loan with a low interest rate that charges high fees may turn out to be more expensive than a personal loan with a high interest rate and low fees.

Personal loan fees could include:

  • Upfront costs – establishment fees or application fees
  • Ongoing fees – annual fees and/or monthly fees
  • Late payment fees – if you miss a payment
  • Extra repayment fees – some lenders charge fees for paying more onto your loan

When you compare personal loans, check the comparison rate to get a better idea of the loan’s total cost. The comparison rate combines a loan’s interest rate and standard charges into a single percentage. However, a loan’s comparison rate may not include its non-standard fees and other costs. 

How much does a personal loan cost?


To work out your interest costs, it's a good idea to use a personal loan calculator. Check different repayment scenarios, with different interest rates, loan terms and loan amounts.
For example, here's how much a $20,000 personal loan might cost:

Loan term Interest rate Monthly repayments Total repayments
3 years 8% $627 $22,562
3 years 10% $645 $23,232
3 years 12% $664 $23,914
5 years 8% $406 $24,332
5 years 10% $425 $25,496
5 years 12% $445 $26,693

Source: MoneySmart

You’ll also need to think about upfront and ongoing fees. Upfront fees can range from $0 to $700, while ongoing fees can set you back up to $15 per month.

What personal loan term should I choose?

Type of personal loan Average length of loan What to consider
Shorter term personal loan Under 12 months
  • Can be paid off more quickly
  • Monthly repayments may be higher
Typical personal loan 3 - 5 years
  • Lower interest rate than a credit card
  • May cost you in fees and/or interest
Longer term personal loan 7 - 10 years
  • More affordable monthly repayments
  • Pay more interest over time

Can I refinance a personal loan?

If you find a more competitive personal loan, or if you want to consolidate your debts, you could refinance your personal loan. Note that the lender may charge you a break fee if you refinance.

To refinance a personal loan, follow these steps:

  1. Check your credit score, as it may have changed while paying off your existing loan.
  2. Compare personal loans to find a more competitive option.
  3. Calculate refinancing costs (break fees, application fees etc).
  4. Apply for the new personal loan.
  5. Ensure your old loan is paid off.

What do I need to prepare before applying for a personal loan?

To apply for a personal loan, most lenders will require that you:

  • are at least 18 years old
  • are an Australian citizen, permanent resident or have a valid visa
  • are employed or receive regular income
  • earn a minimum income (dependent on lender)
  • have a good credit rating

When you make a personal loan application, you’ll typically need to provide:

  • Proof of identity (driver’s licence, passport etc.)
  • Proof of income and employment (payslips, tax information)
  • Details of any other financial commitments
  • Details of additional assets (particularly for secured loans)

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Frequently asked questions

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans – they also get loaned less money. Each lender has its own policies, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

What are the pros and cons of debt consolidation?

In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay a (different) $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 15 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

Can I get an easy/instant personal loan?

Some lenders are able to approve applications over the internet and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.

How do I find out my credit rating/score?

Credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service will give you a free credit report once a year. You can also get a free report if you’ve been refused credit in the past 90 days.

Credit reporting bodies have up to 10 days to provide reports. If you want to access your report quickly, you’ll probably have to pay.

What is credit history?

Your credit history covers everything to do with applying for loans. It includes the number of loans you’ve applied for, the amounts you’ve borrowed and your record of meeting repayment schedules.

How do I know if I've got a bad credit history?

You can find out what your credit history is like by accessing what’s known as your credit rating or credit score.

What causes bad credit history?

Bad credit history is caused by filing for bankruptcy, defaulting on your debts, falling behind on your repayments and having loan applications rejected. Lenders are wary of borrowers who demonstrate this sort of behaviour, because it suggests they might struggle to repay future loans.

How are personal loans regulated?

Personal lenders are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.

When was comprehensive credit reporting introduced?

Comprehensive credit reporting was introduced to make credit reports fairer and more accurate. Under the previous system, credit providers only saw negative information about potential borrowers. Now, they get to see both positive and negative information, which means that credit providers can see if a borrower’s negative credit behaviour is typical or a one-off.

How long will I have bad credit?

Most negative events that appear on a personal’s credit file will stay in their credit history for up to seven years.

You may be able to improve your credit score by correcting errors in your credit report, clearing outstanding debts, and maintaining good financial habits over time.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, with higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will guarantee the loan, taking on the financial responsibility if the borrower defaults.

Can single mothers get personal loans online?

Many lenders offer online applications for personal loans, which can be convenient for borrowers who don’t have a lot of free time. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

How long do personal loans take?

Depending on the lender, some personal loan applications can be approved in as little as one hour, or you may need to wait until the next business day. If approved, you may receive your money on the same day, the next business day, or within the week.

Can I get a fast loan with bad credit?

Some lenders offer fast loans to borrowers with bad credit. Providers of small payday loans of up to $2000 or medium amount loans of up to $5000 may have no credit checks, though these lenders will usually want to confirm you can afford their loans on your income.

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

What do I need to get a fast loan?

Most lenders will need to you provide the following information in your application for a fast loan:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of any assets you own (e.g. car, home etc.)
  • Details of any liabilities you owe (other personal loans, credit cards, mortgages etc.)
  • How much you want to borrow
  • How long you want to pay it back
  • Purpose of your loan

Are there any interest-free emergency loans?

The No Interest Loans Scheme (NILS) allows low income borrowers to take out no-interest loans for up to $1500 to purchase essential goods and services.

There are also similar low-interest loan schemes available to borrowers in financial hardship who are having a tough time getting finance approved.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

Can I get a self-employed personal loan with bad credit?

It may be much more difficult for a self-employed borrower to successfully apply for a personal loan if they also have bad credit. Many lenders already consider self-employed borrowers to be riskier than those in full time employment, so several self-employed personal loans require borrowers to have excellent credit.

If you’re a self-employed borrower with a bad credit history, there may still be personal loan options available to you, such as securing your personal loan against a vehicle of equity in a property, though your interest rates may be higher than those of other borrowers. Consider contacting a lender before applying to discuss your options.

Can I get a $4000 personal loan if I’m unemployed or on Centrelink?

Before most providers of personal loans or medium amount loans will approve an application, they’ll want to know you can afford the loan’s repayments on your current income without ending up in financial stress. Several lenders don’t count Centrelink benefits when assessing a borrower’s income for this purpose, so these borrowers may find it more difficult to be approved for a loan.

If you’re unemployed, self-employed, or if more than 50% of your income come from Centrelink, consider contacting a potential lender before applying, to find out whether they accept borrowers on Centrelink.