The latest lending indicators from the Australian Bureau of Statistics (ABS) saw the value of new loan commitments for fixed term personal finance rise 1.1% in February, following a jump of 0.5% in January 2023.

Commitments for personal lending were propped up by an increase in the number of fixed term loans for other purposes (+2.6%) but were held back by a slump in lending for road vehicles (-0.3%) and personal investment (-2.3%).

If you’re struggling to gain approval for a lump sum, whether it’s due to having a poor credit history or outstanding debts, you may be considering turning to loved ones for financial help. It may be worth considering writing a promissory note that spells out the terms of a loan between two parties.

If you’re in the market for a personal loan, compare a range of different financing options using RateCity’s personal loan comparison tables or by checking out the personal loans leaderboard as determined by Real Time Ratings™.

Here are some of the most competitive personal loans on the RateCity database:

• OurMoneyMarket Low Rate Personal Loan Unsecured (Very Good Credit)at 6.69% (comparison rate 8.06%)
• Now No Fee Personal Loanat 6.75% (comparison rate 6.75%)
• OurMoneyMarket Low Rate Personal Loan Unsecured (Good Credit)at 7.99% (comparison rate 9.02%)
• MoneyPlace Unsecured Personal Loan (Excellent Credit)at 8.49% (comparison rate 8.49%)
• Liberty Unsecured Personal Loan (Excellent Credit)at 8.49% (comparison rate 8.49%)

A personal loan allows you to borrow a sum of money for a specific personal use. Depending on the lender and your financial situation, you may be able to borrow between $2000 and $100,000 with a personal loan. This borrowed money is typically paid to the borrower as a lump sum.

The borrower then repays the loan amount, plus interest, over a predetermined length of time, known as the loan term. This term could be anywhere from 1 to 7 years long.

Renovating a property could potentially improve your lifestyle at home, or increase the value of your investment. But when is the best time to consider undertaking a renovation project, and are there any risks or hazards to avoid?

When financing a renovation or buying a big-ticket item, some homeowners use their home loan to access the money they need. Others finance their project by taking out a personal loan. Which option is the right choice for you?

Besides funding renovation projects, personal loans can be used for a wide variety of purposes, from paying for university fees, legal costs, and home improvement projects, to getting on top of existing debt. A lender may want to know why you are borrowing money, as the loan’s purpose can influence your application’s likelihood of approval. 

Some of the types of personal loans that are available in Australia include:

• Buying a car: Car loans are specialised personal loans for buying vehicles, and may be secured by the value of the car being purchased.
• Debt consolidation: Rolling other debts such as credit cards into the one loan could help you manage your repayments and potentially help save on interest charges.
• Holidays: The right personal loan can help you pay for a trip to remember, to be repaid gradually over time.
• Weddings: It’s no secret that your special day can be expensive and stressful, though a personal loan could help ease some of the financial pressure.
• Student fees: Investing in your education with the help of a personal loan could help you improve your future career prospects.
• Hospital bills: If your health insurance isn’t enough to cover your medical costs, a personal loan may be able to help.
• Veterinary bills: You could use your personal loan to pay for treatment for your feathered, furred, or finned friends.
• Dental work: A personal loan could help cover the cost of routine or major dental procedures.
• Cosmetic surgery: Reconstructive and elective surgeries can be paid for with the right personal loan.
• Rooftop solar: Using a personal loan to help add green features to your home could also help to shrink your future energy bills.
• Boat loans: A specialised type of personal loan that could help you finance a boat and get out on the water.

To get started with your comparison, it’s worth figuring out what type of personal loan may fit your needs. 

Secured personal loans

A secured personal loan uses an asset, such a car, as collateral for the money borrowed. If you can’t keep up with your repayments, the lender can seize the asset used as security. Secured loans often have lower interest rates than unsecured loans as lenders consider them less risky, as the borrower is motivated to pay back their debt to avoid losing their asset. This lower risk could also mean being able to borrow more with a secured loan than with an unsecured loan. 

Unsecured personal loans

An unsecured personal loan doesn’t have an asset attached as collateral. While this means that an unsecured personal loan is more likely to have a higher interest rate than a secured personal loan, there's also no risk of losing your asset if you default. 

Debt consolidation loans

A debt consolidation personal loan may be able to help you manage other outstanding debts by combining them all into a single personal loan. With just one regular repayment to manage, one interest rate, and one set of fees, you can simplify your budget and potentially save money.

For example, imagine you had two maxed-out credit cards and an outstanding car loan. You’re paying interest plus fees on each of these credit products. By taking out a debt consolidation personal loan, you can clear all these outstanding debts at once, leaving you with just one loan to manage. You’ll be charged interest at a single rate (often a lower rate than what’s charged on most credit cards) and pay just one set of loan fees. This may cost you less per month than managing three credit products separately, and help simplify your budgeting.

Keep in mind that if you take out a personal loan with a lengthy loan term, you may pay more in interest on your outstanding debts than you would by paying them off in separately over shorter terms.

Line of credit

A line of credit is a personal loan that functions similarly to a credit card. Rather than borrowing a lump sum to repay over time, you will be able to borrow and repay money up to a maximum credit limit, which is often based on the value of the asset used as security, such as a vehicle, or equity in a property.

Guarantor personal loans

It’s possible to have a family member or friend act as a guarantor on your personal loan to increase your chances of approval. By co-signing your loan, the guarantor accepts responsibility for the debt if you’re unable to repay the loan, making it less risky for the lender to loan you money. You may consider a guarantor personal loan if you don’t meet the eligibility criteria for a personal loan on your own. However, make sure you only borrow an amount you can afford to repay. Failing to meet your repayments could strain your relationship with the guarantor as the financial responsibility for the debt will shift onto them.

There are many different features to consider when choosing a personal loan. Comparing each feature carefully can help you find the right product for you, because the best personal loan for one person may not be what’s best for someone else.

Comparing interest rates is the first step in a personal loan search. The higher the interest rate, the more interest you could pay over the life of the loan.

You’ll also need to decide between the two main types of interest rates: fixed rate personal loans or variable rate personal loans.

A fixed interest rate will remain the same throughout the life of the loan, whereas a variable interest rate can fluctuate with the market.

A fixed rate loan can be simple to manage as the repayments will remain the same for the duration of the loan term. If you opt for a variable rate loan, it’s important to allow some breathing room in your budget to allow for potential rate rises.

When comparing personal loan rates, remember that the lowest interest rate doesn’t always indicate the cheapest personal loan. That’s because interest rates don’t factor in fees, which can really add to a loan’s total cost over time.

This is where the comparison rate comes in handy, as it includes both the loan’s interest rate and its main fees, which can give you a better idea of its total cost. If two personal loan options have the same interest rate, but different comparison rates, the loan with the higher comparison rate may charge higher fees. 

The amount of time you have to pay off your loan (plus interest and fees) is determined by the length of the loan term. Personal loans typically have terms from 1 to 5 years.

When deciding on a term length for your personal loan, keep in mind that the longer the term, the lower the repayments, but the more you’ll likely pay in total for interest charges. Shorter loan terms may have more expensive repayments, but you’ll pay your loan off quicker and in turn spend less in total on interest charges.

Different personal loan offers may offer extra features that could be important to you, and affect how you pay off your loan. Some of these include:

• Extra repayments: One way to pay off your personal loan sooner is to make extra repayments. However, not all lenders will allow you to make additional repayments, and some may charge a fee, while others may offer unlimited extra repayments.
• A redraw facility: A personal loan with a redraw facility will allow you to withdraw extra repayments you’ve made and return them to your bank account. This can be handy if you want to pay less interest on your personal loan, but still want access to your money. Keep in mind that not all personal loans come with redraw facilities, and those that do may charge redraw fees.

The types of fees you may be charged for your personal loan will differ from one lender to the next. Some of these may include:

• Upfront costs (e.g., establishment fees or application fees)
• Ongoing fees (e.g., annual fees and/or monthly fees, including service fees)
• Late payment fees
• Extra repayment fees
• Early repayment fees/exit fees
• Redraw fees

Most personal loans have a minimum amount of at least $2000. To borrow less than $2000, you may need to search for a payday loan or medium-amount loan, though be wary of the fees involved. Borrowers experiencing financial stress may also be able to apply for the No Interest Loan Scheme (NILS) for essential purchases.

The maximum borrowing amount for a personal loan may depend on the lender, though a maximum amount of between $50,000 and $100,000 is not uncommon. The maximum amount a lender will allow you to borrow may also depend on factors such as your credit score or credit rating, your income and expense, or what you use as security for the loan.

Personal loan terms can vary anywhere from six months to ten years, with many lasting between 12 and 60 months. 

Choosing a longer loan term means smaller monthly repayments, easing some of your budget pressure. However, the longer you take to pay off a personal loan, the more interest you’ll pay on the loan overall. The reverse is also true – a shorter personal loan term will likely cost you more from month to month, but you’ll be charged less total interest on the loan. 

You can use a Personal Loan Calculator to work out how your choice of loan term may affect your personal loan repayments, and whether a shorter or longer personal loan term may better suit your personal financial needs.

Your credit score could impact your personal loan options, including the choice of lenders and the rates available to you. Your credit score is used by lenders as a measure of your creditworthiness or how likely you’re to repay the loan.

If your credit score is low, you may find it challenging to get approved for a personal loan or only find yourself eligible for loans with higher interest rates. On the other hand, an excellent credit score could give you access to personal loan products from a wide range of lenders. You might also find yourself eligible for lower interest rates on personal loans, as borrowers with high credit scores are viewed as less of a risk to the lender than those with bad credit scores.

That said, there are several other factors that contribute to the success of a personal loan application. Consider the eligibility criteria of each individual product before applying.

Borrowers with bad credit may still be able to find a personal loan product that works for them. It’s also worth thinking about the steps you can take to improve your credit score, such as working on existing debts and building your savings.

Thanks to Comprehensive Credit Reporting (CCR), both positive and negative credit events are recorded in your credit history to help generate your credit score. Consistently making your personal loan repayments on time could help you build up a good credit score over time.

However, if your personal loan is your only form of credit, paying it off in full could potentially lead to a dip in your credit score, as it will no longer be an active part of your credit history. That said, you may find that the benefits of clearing your personal loan debt outweigh any potential short-term dips to your credit score.

Improving your credit score won’t automatically lower the repayments on any outstanding personal loans you may have. However, if you were to apply for another loan, including refinancing your current personal loan, your improved credit score may help you to qualify for a lower personal loan interest rate, which could help to lower your repayments.

1. Check your credit score: Knowing your credit score can help give you a better understanding of which personal loans and interest rates might be available to you. You can visit RateCity’s credit score hub to access your score within minutes.
2. Assess your budget: Consider using RateCity’s personal loan calculator to estimate your loan repayments and ensure they’ll fit comfortably within your budget. This could help you make an informed decision on how much you can afford to borrow and increase your chances of approval.
3. Search and compare: RateCity’s comparison tables allow you to easily compare personal loans from a wide range of lenders, so you can find one that best suits your individual needs.
4. Check the lending criteria: Once you have compiled a shortlist of your preferred personal loan products, check to see whether you meet the eligibility requirements to avoid having your application rejected. You will often need to provide your income and expenses, as well as proof of age, identity, and proof of citizenship or residency. 
5. Prepare your application:  Depending on the lender, you may have the option to submit your personal loan application online or at a local branch. It’s a good idea to have all your required documentation ready before you get started.
6. Submit your application and await a decision: After submitting the information required, it’s time to await a response from the lender.

To take the hassle out of shopping for a personal loan, RateCity has several tools that may be useful to you:

A personal loan comparison table, like the one on this page, can be a helpful tool when narrowing down your options. You can search by loan amount and loan term and use the filters to find products that may be more suited to your needs.

RateCity’s personal loan calculator can give you an estimate of how much your personal loan repayments may cost based on the amount you’d like to borrow, your preferred loan term and interest rate. The repayment calculator can also provide you with an estimate of the total interest payable and total amount payable based on weekly, fortnightly or monthly repayments.

Real Time Ratings™ is a system that ranks personal loans based on your own individual requirements. It gives each personal loan a score out of five stars, based on loan costs and flexibility, in real time as you use the site.

For information specific to your personal financial situation, consider reaching out to a personal loan broker or financial adviser.