Personal Loans

Personal loans are a type of unsecured loan offered by banks, credit unions, and other lenders. They are typically not backed by security, which means you don’t have to put up any assets to secure the loan. Personal loans can be used for a wide range of purposes, including consolidating debt, financing home improvements, covering medical expenses, or funding major purchases. The loan terms, including the interest rate and repayment period, vary based on the lender and your credit profile​. As borrowers for a personal loan are individuals and not corporate entities, personal loans are regulated under the National Credit Code.

Personal loans work by providing you with a lump sum of money that you agree to repay over a set period, typically with fixed monthly payments. The loan amount, interest rate, and repayment terms are determined by your credit score and the lender’s policies. You can use personal loans for various purposes, such as debt consolidation, home improvements, or major purchases. Interest accrues on the borrowed amount, and you are required to make regular payments until the loan is fully repaid.

The amount you can borrow with a personal loan varies depending on the lender and your creditworthiness. You can get both large and small personal loans. Generally, they can range from $2,000 to $100,000. The exact amount you are eligible for will be determined by factors such as your credit score, income, existing debt, and the lender’s policies​.

There is no strict limit to the number of personal loans you can have at once; it depends on your financial situation and the policy of the lenders. However, taking out multiple personal loans can impact your credit score and debt-to-income ratio, which may affect your ability to obtain additional credit. It’s important to manage your debt responsibly and ensure you can meet all repayment obligations before taking out multiple loans.

The approval time for personal loans varies by lender. Some online lenders can provide instant or same-day approval, while traditional banks and credit unions might take a few days to a week to process your application. Factors affecting approval time include the completeness of your application, the accuracy of your provided documents, and the lender’s internal processes.

Once approved, the processing time for personal loans can vary. Many lenders can disburse funds within one to two business days after approval, while others might take a week or longer, depending on their processing procedures and your bank’s transfer policies. To expedite the process, ensure you provide all required documentation promptly and accurately.

The interest rate for personal loans varies widely based on the lender, loan amount, loan term, and your creditworthiness. As of 2024, personal loan interest rates in Australia typically range from around 5% to 25% per annum. It’s important to compare rates from different lenders and make sure you’re looking at the comparison rate, which is a more accurate figure of the loan cost.

Loan amounts typically range from $2,000 to $100,000, depending on the lender, your credit score and income. The exact amount you can borrow will be determined by your choice of lender, their policies and how they calculate the amount you are able to repay.

Acceptable loan purposes for a personal loan include home improvements, travel, major purchases like cars or furniture, debt consolidation, medical expenses, weddings, and education costs. Lenders will find gambling an unacceptable purpose for a personal loan and some may restrict lending for business purposes.

Typically, you will need to provide proof of identity (such as a passport or driver’s license), proof of income (like pay slips or bank statements), details of your existing credit commitments, and proof of address. Some lenders may ask for additional documentation based on your individual circumstances​ and business owners are likely to be asked for their tax returns.

Interest rates on personal loans are influenced by several factors, including your credit score, loan amount, loan term, and whether the loan is secured or unsecured. A higher credit score generally results in more lender options and lower rates than what will be available to an applicant with a poor credit score.

Many lenders allow early repayment without penalty, but it’s important to check the terms and conditions of your loan agreement. Repaying a personal loan early can save you money on interest over the life of the loan.

You can improve your chances of approval for a personal loan if you have a good credit score, low levels of existing debt, provide accurate and complete documentation, and income to service the loan.

Once your loan application is approved and all necessary documentation is submitted, personal loan funds are typically disbursed within one to two business days, depending on your bank’s processing times​.

Some lenders specialise in providing bad credit personal loans or loans to individuals with past defaults, but these will likely come with higher interest rates. It’s not normally possible to get a personal loan if you have unpaid defaults.

Personal loans may come with various fees, including application fees, monthly service fees, and potentially other fees.  Your loan agreement will set out a schedule of all loan fees that may apply to your loan.

If you miss a personal loan repayment, you may incur dishonour fees and it could negatively impact your credit score. Repeated missed payments could result in more severe consequences, such as your loan going into default. It’s important to contact your lender immediately if you think you might miss a payment to discuss possible solutions.​

Yes, many lenders offer online applications for personal loans. This process is usually straightforward and allows you to upload necessary documents, track your application status, and receive approval and funds electronically​.

A credit score is a representation of your creditworthiness, based on your credit history, that lenders will use to assess the risk of lending to you. Your credit score can be negatively impacted by late payments, defaults and high numbers of applications for credit. A higher credit score typically means better loan terms, such as lower interest rates and higher borrowing limits​.  A poor credit score can result in your personal loan application being declined.

A personal loan might be right for you if you need a lump sum of money for a specific purpose and are confident in your ability to make the repayments.

Yes, personal loans are often used for debt consolidation. This involves taking out a new loan to pay off multiple existing debts, ideally at a lower interest rate, simplifying your repayments into one monthly instalment​.

Loan terms for personal loans typically range from one to seven years. The term you choose can affect your monthly repayments and the total interest paid over the life of the loan. Shorter terms mean higher monthly payments but less interest paid overall.

Yes, self-employed individuals can apply for personal loans.  Self-employed applicants will likely need to provide additional documentation to demonstrate income, such as tax returns or business financial statements.