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Minimum and maximum loan periods vary between 6 months and 10 years. Comparison
interest rates vary between 6.55% and 20.89% p.a. Total interest repayments vary between
$1,387 and $4,165 over the life of the loan. *Comparison rate is based on an unsecured loan
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Low-interest personal loans – Roll back your borrowing costs
There’s so much you can do with a personal loan, but if finance costs are holding you back, a high interest rate could be the culprit. Here’s everything you need to know about low-interest personal loans and how to sign up for one.
What’s a low rate personal loan?
Breaking down the “mechanics” of low-interest personal loans is easy once you start with the basics. First, imagine you want to borrow money from a lender.
- How much can you borrow? – Australian lenders typically offer loan amounts from $2,000 up to $100,000 for low-interest personal loans
- For how long can you borrow? – Average loan terms are between one and five years.
- What’s the cost of borrowing? – The interest rate on your loan is usually an annual percentage that applies to any amount you owe. The lower your rate, the less you have to pay back to the lender. This generally motivates you to shop around for cheap rates by comparing products from different Australian lenders. Doing so allows you to spot a lender who’s charging a lower rate than usual for a particular product.
Therefore, a low-interest rate personal loan is defined by current trends in the Australian market (these are always changing). More specifically, a low interest rate is one that’s below average market rates. But, always keep in mind there are several low rates at any point in time, depending on the type of personal loan, its requirements, and the features it has.
What are the types of low-interest personal loans in Australia?
Any low rate personal loan you choose will either be secured or unsecured. Your choice of interest rate will also be split between fixed and variable.
- Secured personal loans. You can only seal a secured deal with an asset (usually a car or property). The asset backs up any amount you borrow, so the lender can sell it if they don’t get their money back. Since the lender isn’t too worried about the risk of financial loss, they’ll likely offer a lower interest rate.
- Unsecured personal loans. Unsecured loans don’t require any collateral attachments, so you won’t need a high-value item to apply. However, instead of using an asset to protect themselves from the risk of financial loss, the lender uses higher rates.
- Fixed-rate personal loans. Your interest rate is pinned to the same percentage point until you finish repayments. Benefits include repayments that never change, which helps to keep your budget stable. The downside comes from not being able to save when there’s an official rate cut.
- Variable-rate personal loans. A variable interest rate will climb up or down depending on what’s happening to the Reserve Bank cash rate. Variable-rate loans usually have more flexible features, such as the ability to make extra repayments. You also get to save if the rate falls. On the other hand, there are disadvantages in constantly adjusting your budget and dealing with increased repayments when the cash rate goes up.
How do I get a low-interest personal loan?
As mentioned earlier, getting a low interest rate generally means you pay less over the life of a loan. However, don’t take this as a hard and fast rule. Instead of viewing affordable borrowing costs through the lens of a low rate, it’s best also to consider other factors that can chip in to reduce total costs. Here are six top ways to get a low rate personal loan with a low overall cost:
Compare personal loans
A personal loan comparison not only helps you find a low rate. You’ll also get to choose a product with features that suit your needs. Generally, it’s best to first decide on the type of loan you want to ensure an apples-to-apples comparison.
Apply the necessary filters when you compare personal loans in the product table above. You can also use our low-interest personal loan calculator to track down affordable repayments that fit into your budget.
Check the comparison rate
A low rate could potentially score you hundreds or thousands in savings – but there’s a catch. The fees and charges for your loan also have to play along before you can count your winnings. To get a quick and better idea of what your fees and charges look like, compare the advertised rate with the comparison rate.
Usually, you can expect the comparison rate to be higher by a few percentage points since it includes the interest rate and all standard fees and charges that come with the loan. In turn, these charges include establishment fees, application fees, and ongoing monthly and annual fees.
Therefore, looking at the comparison rate keeps you ‘tuned in’ to your loan’s true cost. However, be mindful of extra costs that only pop up when activated but which are not included in the comparison rate, for instance, late payment fees. To keep sight of all costs, you might need to thoroughly comb through the terms and conditions before signing the dotted line.
Check your credit score
Some Australian lenders offer risk-based interest rates, which means you get a personalised rate that matches your credit profile. So, if you have an impeccable credit score and a clean credit history, you’re more likely to get the best interest rate on offer.
But, before you apply, check your credit score and fix any errors to raise your overall score. Remember to apply for new credit sparingly since every application triggers a hard enquiry. This usually ends up on your credit report, and if you rack up too many enquiries, your credit score could take a hit.
Meet the lender’s requirements
Financial providers usually reserve their best rates for borrowers with excellent credit history and a stable, sufficient income source. If this sounds like you, it’s in your best interests to make sure you’ve supplied the lender with the required information and paperwork. Even if you’re not the most ideal of borrowers, paying heed to the lender’s requirements pushes your application a step closer towards a fair and potentially favourable assessment.
You’ll generally need to provide the following when applying:
- Personal and contact details
- Proof of identification – Valid Australian ID, passport, etc.
- Employment details
- Bank account details
- Proof of income – recent bank statements and payslips
- Financial details about your assets, liabilities, and expenses
Don’t be afraid to engage your credit provider and lobby for a better deal or a discounted rate. If you’re an existing client, there’s no harm in playing the loyalty card. This is especially so if you’ve been an ideal borrower with no previous defaults.
Make extra repayments
A low interest rate is not the only way to cut back on the cost of your personal loan. If your budget allows it, you can throw in extra repayments on top of your regular ones. By paying off your debt quickly, you neatly avoid ongoing fees that apply as long as you still owe the lender.
But, if you plan on making additional personal loan repayments, keep an eye out for associated fees. If the lender charges steep extra repayment fees, exiting the loan early might not be cost-effective.
Low rate personal loans for unique situations
- Self-employed. A low rate self-employed personal loan generally works hand in hand with an impeccable credit rating. The lender will also check your ability to repay the debt by asking for documents such as tax returns and financial and bank statements.
- Joint-application. A low-rate joint application personal loan only works if the individuals applying both have good credit scores. If you and your co-borrowers look good on paper, your combined creditworthiness can net you a much lower rate than if you had applied separately.
- Bad credit. Credit providers are more likely to stick higher rates on a bad credit personal loan. However, you can still get a better deal by choosing a secured loan and offering a suitable asset as collateral. A second option involves adding a guarantor with a strong credit profile. The person becomes responsible for your repayments if you slip up, thereby neutralising some of the lender’s risk.
Where can I find low rate personal loans?
Shopping for a low-interest personal loan? Consider the following types of Australian lenders:
- Traditional banks, including the big four
- Credit unions
- Peer-to-peer (P2P) lenders
- Online lenders
Generally, banks have a more comprehensive range of financial products to offer. You’ll also be able to borrow more, though you might meet stricter lending criteria. Consider other types of lenders if you’re looking for more relaxed requirements, but keep in mind these come with a limited borrowing capacity.
What can I use a low-interest rate personal loan for?
A low rate personal loan helps you foot the bill for a variety of expenses, including:
- Paying for a wedding. Say yes to a low rate wedding loan that brings your big day to life while keeping costs sensible.
- Buying an engagement ring. Expand your options and find the right engagement ring by applying for a secured or unsecured loan.
- Going on holiday. Finance your dream holiday and travel in style with a low rate holiday loan that won’t break the bank.
- Getting a new ride. Getting a low rate is easier if you opt for a secured car loan.
- Renovating your home. A low rate home improvement loan might be perfect if you want to spread the cost of major remodels and repairs.
- Consolidating your debt. Many Aussies have benefited from low rate debt consolidation loans that roll personal loans and credit cards into a single, more affordable repayment.
- Covering your medical bills. A low rate personal loan can stretch to cover dental bills, cosmetic surgery costs, IVF costs, and other hospital bills.
How to apply
All set to apply for your low-interest personal loan? Click “Go to Site” for your top pick in the comparison table above. This takes you straight to the lender’s website, where you’ll be able to submit an online application.
Low-interest personal loans FAQ
Which features should I choose to make my loan flexible?
Find out if you have the option to make repayments per week, fortnight, or month. Also, dig into the details of how you’ll make repayments, due dates, and whether you’ll be able to track the progress of your loan online.
Is a low rate personal loan better than a credit card?
Getting a low rate personal loan is easier if you have a stellar credit score. It’s also cheaper if you’re planning to pay for a bigger project such as a home renovation. But, if you manage to get your hands on an interest-free credit card, you can use it to cover smaller purchases where the money is needed quickly.
What’s a redraw facility?
A redraw facility allows you to tap into any extra repayments you have already made. This can be handy if you come across an emergency, but you’ll have to pay additional fees to use the service.
How do I switch to a personal loan with a lower rate?
If you’re currently dealing with numerous debts, you can apply for a debt consolidation loan. You can also refinance by taking out a low-interest rate personal loan and using the funds to cancel your existing debt.
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