A loan just for you
A personal loan can help you pay for something special like a
holiday or home renovations. Make sure you can afford to borrow,
and then shop around to get the best deal on interest rates, fees
How personal loans work
If you get a personal loan, you must repay the money you borrow
within a specific time, usually 1 to 5 years. You also pay interest
on the amount you borrow, plus fees and charges.
What you need to give the credit provider
All credit providers are required by law to lend you money
responsibly. This means they must not lend you money if they think
the credit is unsuitable for you.
The credit provider may look at your credit report and
- Bank account statements
- Copies of other credit contracts or bills
This is so they can verify your ability to meet the loan
repayments without financial hardship.
Secured and unsecured loans
Secured loans usually offer lower interest rates than unsecured
loans, but you need to put up an asset, like your car or home, as
'security' to get the loan. If you don't repay the loan, the credit
provider may (in some circumstances) sell your asset to get its
money back without first going to court.
With unsecured loans you don't have to put up an asset as
security, but the interest rate is usually higher. To get an
unsecured loan, you must convince the credit provider that you can
repay the loan. If you don't repay the loan, the credit provider
may take you to court to get its money back.
Peer to peer lending
Peer to peer lending, also known as marketplace lending, is an
alternative to traditional lenders such as banks, building
societies or credit unions. People who have money to invest are
matched with people who are looking for a loan, through an online
Marketplace lenders offer secured and unsecured personal loans
and you will need to provide your personal and financial details,
just as you would with a more traditional lender. Find out more
about peer to peer lending.
Check the interest rate, fees and
Personal loans usually have lower interest rates than credit
cards - but they are still high compared to other types of credit.
Fees can also be higher.
Annual percentage rate
The annual percentage rate (APR) is the interest rate your
credit provider will charge you to borrow money. It is also known
as the 'listed' or 'published' rate. Multiply the APR by the term
of the loan to find out how much interest you will have to pay over
the life of the loan.
Work out your interest payments.
Personal loan calculator
Fees and charges
From 1 July 2013, fees charged on loans of $2,000 or less are
capped (that is, limited to a maximum amount). For more
information, see small amount loans.
From 1 July 2013, the fees and charges allowed on loans of more
than $2,000 are also capped.
A small variation in interest rate can add up to a lot over
time, so always shop around. Find out what charges you will be up
for if you can't meet your repayments.
Fee limits on medium amount loans ($2001-$5000)
For 'medium amount' loans which are for amounts between $2,001
and $5,000 to be repaid between 16 days and 2 years, fees are
- A one-off fee of $400
- A maximum annual interest rate of 48%, including all other fees
Fee limits on loans of more than $5000
For all loans of more than $5,000 or with terms longer than 2
years, the fees and charges must not be more than 48% annually
(including any establishment or other fixed fees).
These fee caps do not apply to loans offered by Authorised
Deposit-taking Institutions (ADIs) such as banks, building
societies or credit unions.
Find out the term of the loan
A personal loan could sound good because it may offer a lower
interest rate than other types of credit and repayments are spread
over a long time. But keep in mind that the longer the loan term,
the more you will pay in interest.
When comparing loans, make sure the term is the same for each
loan. This will give you a true picture of the difference in
Read your credit
When you take out a personal loan, you will be asked to sign a
contract. The contract will detail:
- The amount you borrowed
- The interest rate, fees and charges
- The amount of repayments and when they are due
- The term of the loan
Always check the terms and conditions of your contract before
Check your credit provider
All credit providers and credit assistance providers (such as
brokers) must be licensed with ASIC or be an authorised
representative of someone who is licensed.
Search ASIC Connect's Professional Registers to
check your credit provider or credit assistance provider is
licensed or you can phone ASIC's Infoline on 1300 300
For more information see consumer credit
Warning about loan scams
Be suspicious if you are contacted out of the blue by a company
offering loans with low interest rates, as they could be operating
a loan scam. Also be cautious if you come across a website offering
loan applications online as you will need to check they are
legitmate before apply for a loan. See our tips on how to pick a loan
Stay out of debt
Try to pay off the loan quickly to reduce the amount of interest
you will pay. Contact your credit provider early if you have
trouble making repayments or see trouble with
debt for help and advice. Also see borrowing basics for more tips on
managing credit and loans.
Find out the true cost of a personal loan before
you sign up. Consider whether it is the most cost effective credit
product for you. Know exactly who you're dealing with, and act
early if you find you can't keep up with repayments.
Last updated: 22 Nov 2018