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based on $20,000 loan amount for 3 years at 6.47%

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Learn more about personal loans

Need a helping financial hand? If you’re planning a wedding, your next holiday or need to consolidate debt, unsecured personal loans may help. But it’s important you do your research and understand how this type of loan works.  

What are unsecured personal loans? 

An unsecured personal loan involves a credit provider lends you an amount of money that is not secured by the value of an asset. Unsecured personal loans typically range from one to seven years and allow you to borrow from $2,000 to $100,000. They can be used for a range of purposes.  

As you provide no collateral, if you default on your loan repayments, your lender cannot repossess any asset that you have purchased with the loan funds. This doesn’t mean that defaulting doesn’t have consequence. The lender might pursue legal action to force the sale of one of your assets. You might also be forced into bankruptcy. Unsecured personal loans generally have higher interest rates than secured personal loans as there is a greater risk to the lender than giving a secured loan.  

What are the main features of unsecured personal loans?

There are a few features to consider when comparing unsecured personal loans. These include: 

Unsecured loan feature  Description
Interest rate  The rate charged by the lender on top of the loan amount. Typically higher than a secured loan.  
Rate type  Fixed or variable rates. Fixed rates will stay the same over the life of the loan, which is helpful if you like stability in your budgeting. Variable rates mean your repayment amounts may fluctuate depending on the lender and market interest rates. You’ll ride the highs and lows of the market.  
Loan term  1 - 7 years. Can differ depending on your lender.  
Loan amount  $2,000 - $100,000. Can differ depending on your lender.  
Repayment frequency  Weekly, fortnightly or monthly.
Extra repayments  Some loans allow you to make additional payments outside of the repayment schedule. This lets you pay off the loan sooner and reduce the total interest payable.  
Redraw facility  Allows you to make repayments ahead of schedule and take back this extra money if you ever need it.  

What fees are charged for unsecured personal loans? 

Fees differ from lender to lender. These may include, but are not limited to: 

  • Establishment fees 
  • Monthly account-keeping fees 
  • Late payment fees 
  • Repayment redraw fees 
  • Early repayment fees

It’s important that you don’t just look at the advertised rate when comparing unsecured personal loans. Many factors can make up the total cost. If you want a redraw facility, for example, this may involve signing up to a loan with a higher rate. Fees and costs can also impact the overall repayment amount.

Using the loan’s ‘comparison rate’ is an ideal way to compare loans. This combines a loan's advertised interest rate with its standard fees and charges, giving you a more accurate idea of its overall cost. Just watch out for any extra fees and charges that aren’t included in the comparison rate. You should ask a lender whether any of these apply.  

What can you use an unsecured personal loan for?

There are several things you can use an unsecured personal loan to finance. These include, but are not limited to:

  • Debt consolidation 
  • A holiday 
  • A wedding 
  • Furnishing a new home 
  • Renovating your home 
  • Paying school fees 
  • Paying off medical or hospital bills 
  • Fixing your car


How much does an unsecured personal loan cost?

There are two main costs for an unsecured personal loan outside of the loan itself – fees and interest. To give you an idea of how different interest rates affect loans, the table below shows how much you'd have to repay if you borrowed $25,000 over five years: 

Interest rate  Monthly repayments  Total interest Total repayments 
7%  $495  $4,702  $29,702  
8% $507  $5,415  $30,415 
9% $519  $6,138  $31,138 
10%  $531  $6,871  $31,871 
11% $544  $7,614  $32,614 

Note: Figures based on monthly repayment frequency. Figures don’t factor in fees. 

You can calculate your own potential loan repayments with our personal loan calculator

What are the benefits of unsecured personal loans?

If you were to default on a secured loan, your lender would be able to seize the asset to recoup their losses. A major advantage of an unsecured personal loan is that you don't need to secure an asset to the loan as collateral, such as equity in your home or a car.  

However, a disadvantage is that you'll be charged a higher interest rate than if you were able to offer collateral. As stated earlier, lenders will see you as a more risky borrower. This means you have a higher chance of not paying back the loan. Lenders typically charge a higher rate tocover their risk.  

Another disadvantage is that there are fewer lending options out there. Unsecured personal loans are less popular than secured ones as lenders prefer to decrease the risk on their books.This lesser competition is another reason interest rates are higher than on secured loans.

Is a credit card better than an unsecured personal loan? 

As a general rule, borrowing money through a credit card is more expensive than taking out an unsecured personal loan as the card usually has charges a higher interest rate. Credit card providers also won't force you to pay off your debt in under ten years. Minimum credit card repayments are either fixed amounts (say $20 to $25) or a percentage of your closing monthlybalance (say 1 per cent to 3 per cent).  

For example, James has a credit card bill of $25,000 on a card which charges 10 per cent interest. The minimum repayments are only 2 per cent of his outstanding monthly balance. If he only made minimum repayments it would take him 28 years to pay the balance in full. That’s a long time to be incurring interest charges. 

Disadvantages of an unsecured car loan 

The main disadvantage of an unsecured personal loan is that there is a higher financial risk to the lender, so they typically charge higher interest rates and possibly fees and charges.

Higher interest rate than secured loans: Unsecured loans will most often have high interest rates, due to the financial risk associated with giving a loan without security. Also, make sure to investigate all the fees and charges, as this is often where the lender makes money on the loan.

Strict rules on which borrowers qualify: The eligibility criteria is much stricter for unsecured loans than secured as there is no collateral on the loan. Borrowers must have a good credit rating, proof of income and expenses, and sometimes lenders will ask for a deposit to add to security. If you don’t have a good credit rating, it may not be a good idea to apply for a loan as a rejection will reduce your creditworthiness.

Lenders can take legal action: If you do not make your repayments on an unsecured car loan, you will still have access to the vehicle, but could face legal action. Lenders and credit providers can turn your debt over to a collection agency, or file a civil lawsuit to recoup the money that’s owed to them. 


Frequently asked questions

What is an unsecured bad credit personal loan?

A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset (such as a car or jewellery) as collateral or security. Lenders charge higher interest rates on unsecured loans than secured loans.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent, without worrying about ending up out of pocket if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

Can you refinance a $5000 personal loan?

Many personal loans, much like home loans, can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to pay extra onto your personal loan or medium amount loan could bring you benefits, such as reducing the total interest you’re charged on your loan, or clearing your debt ahead of schedule.

Check your loan’s terms and conditions before putting extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. They have higher interest rates than regular personal loans and are also harder to access.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan – however, the process is easier and faster than taking out a mortgage.

Loan sizes usually range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.

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.

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.

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.

How can I get a $3000 loan approved?

Personal loans and medium amount loans from responsible lenders don’t have guaranteed approval, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income (Centrelink payments may not count – so you should check with the lender prior to making an application).

How much can I borrow with a personal loan?

It’s unusual for a lender to make a personal loan above $100,000, although there is no formal limit. As with all lending products, each lender sets its own policies, while each borrower is assessed on a case-by-case basis.

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.

What is a secured bad credit personal loan?

A bad credit personal loan is ‘secured’ when the borrower offers up an asset (such as a car or jewellery) as collateral or security. The lender can then seize the asset if the borrower fails to repay the loan.

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.

Is it hard to improve your credit score?

It can be hard to improve your credit score, as it usually requires sacrifice and discipline, but hard doesn’t necessarily mean complicated. There are nine steps you can take to improve your credit score, most of which are simple to follow.

As a general rule, the lower your credit score, the more remedies you can apply and the greater the scope for improvement.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or even the same day, in some cases.

What can I use a bad credit personal loan for?

Generally, bad credit personal loans can be used for one or more of the following purposes:

  • Debt consolidation
  • Paying bills
  • Buying vehicles
  • Moving expenses
  • Holidays
  • Weddings
  • Education

Some lenders restrict how their bad credit personal loans can be used as part of their commitment to responsible lending – be sure to check before applying.

Will comprehensive credit reporting change my credit score?

Comprehensive credit reporting may change your credit score – either positively or negatively.

Under comprehensive credit reporting, credit providers will share more information about how you and other Australians manage credit products. That means credit reporting bureaus will be able to make a more thorough assessment of everyone’s credit behaviour. For some consumers, that will lead to higher scores; for others, lower scores.