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Unsecured personal loans in Australia
If you’re looking for a loan in Australia for anything other than a home or a vehicle, chances are what you’re getting is an unsecured personal loan.
It’s a very broad category, meaning it can be hard to narrow down your options. But if you look beyond the lenders’ flashy marketing, an unsecured personal loan is a fairly straightforward product.
There are just a handful of really key factors to pay attention to when comparing them. We'll take you through them in this guide.
What is an unsecured personal loan?
An unsecured personal loan is a fixed-term loan that does not have any security attached to it. Because there’s no need for a specific asset to be used as security, an unsecured personal loan can be used to pay for almost anything.
That’s unlike a secured personal loan (e.g. a car loan). If a loan is secured, the lender can reclaim an asset belonging to the borrower if they can’t repay the loan.
According to Money's personal loan data, the most common purposes for an unsecured personal loan include:
Why are unsecured loans more expensive than secured loans?
The cost of a most loans is based on risk. The higher the risk of lending money, the more a lender will charge.
An unsecured personal loan is riskier for a lender. Because there’s no security (aka ‘collateral’) for the lender to reclaim if you default on the loan.
But it’s still possible to find low interest rates on unsecured personal loans. Finding a low rate means a lower regular repayment and less to pay in total when you calculate the overall cost of the personal loan.
To find the best unsecured personal loan for you, I generally suggest basin your comparison on four key factors.
The interest rate
Look for the lowest interest rate you’re eligible for. And remember, the lender will set your interest rate based on risk. Your credit score is a big factor here. The overall average interest rate on an unsecured personal loan in Australia is 13.87% p.a., according to Money data. But borrowers in the top credit score bracket (853-1,200) pay 9.79% p.a. on average.
Fees
Unsecured personal loans can come with application fees, annual or monthly fees and fees if you make extra repayments or repay the loan early. Fore example, the average monthly fee on personal loans is $5. That doesn't sound like much but it adds to to $300 over a five-year loan term. There are plenty of unsecured personal loan options with $0 in fees.
Comparison rate
The personal loan comparison rate combines the interest rate with most loan fees. It’s designed to give a closer reflection of the total annual cost of the unsecured loan.
Loan term
This is simply how long you have to repay the loan. A shorter term will save you money overall, but the regular repayments will be higher. Most borrowers request a five-year term, our analysis shows.
How much money can you borrow with an unsecured personal loan?
You can borrow from $1,000 up to $50,000 with an unsecured personal loan.
Our data shows the average unsecured personal loan amount requested is $22,643.
But remember, how much you can borrow will come down to your circumstances. The lender will consider your credit score, income and expenses when deciding how much it will lend to you.
How to qualify and apply for an unsecured personal loan
So, who can get an unsecured loan? Well, the basic requirements are that you’re:
Then, to get an unsecured personal loan you will need to:
It’s generally more common to have the choice of a fixed or variable interest rate on an unsecured personal loan (secured car loans are usually fixed).
When deciding which is best for you, the main factor is how much you value certainty.
Fixed rate unsecured personal loan
Your interest rate and repayments will not change during the loan. That means you won’t benefit if rates decrease, but you won’t need to pay more if rates go up. You may not have as much flexibility to make extra repayments on a fixed rate loan.
Variable rate unsecured personal loan
Your interest rate and repayments could go up or down. You’ll benefit if rates go down, but your costs will increase if rates go up. You’ll usually have more flexibility to repay the loan early.
Is an unsecured personal loan a good idea?
Like any loan you need to weigh up the pros and cons of taking it out. Ultimately, the big question to ask yourself is can you comfortably afford the repayments? Both now and in the future.
You can also consider some of the other pros and cons. I’ve summarised these below.
How we help you find the best personal loan
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Can I buy a car with an unsecured personal loan?
Yes, you can. But generally unless the car you’re buying is over 12 years old (the maximum varies by lender), you should be eligible for a secured car loan.
This will typically be a cheaper option.
That’s just one of the factors to consider when comparing personal loans versus car loans.
Can I get an unsecured personal loan if I have bad credit?
Yes it’s possible, but bear in mind that you will most likely have a higher interest rate than a good credit borrower applying for the same unsecured personal loan.
You will also have fewer lenders to choose from as many of the bigger banks and credit unions do not offer bad credit personal loans.
On the plus side you may be able to refinance your personal loan to a lower rate later on if your credit score has improved.
How long does it take to be approved for an unsecured personal loan?
Because unsecured loans do not require you to put up an asset as collateral, the personal loan application process is usually more straightforward.
How long it takes varies depending on the lender, but in some cases it’s possible to be approved and have the loan funds paid to you within a day.
Do banks offer unsecured personal loans?
Yes, most banks offer unsecured personal loans, including the big four of Commbank, Westpac, NAB and ANZ.
But it can pay to shop around.
We see borrowers save thousands by comparing other options, instead of simply applying for a loan with their own bank.
What happens if I can’t repay my unsecured personal loan?
With an unsecured personal loan, the lender will not be able to reclaim as asset that you own to recoup its costs.
BUT you are still responsible for the loan and the lender may have other options, including taking you to court, if you fail to make the repayments.
If you’re struggling, it’s often useful to discuss this with your lender. They may have options available to help make your repayments more manageable.
A debt consolidation loan is another common technique designed to help people manage their debt.
Sean Callery is the Editor of Money.com.au. He has over 15 years of international experience. He is qualified with a Certificate IV in Finance and Mortgage Broking (FNS40821) and is compliant to provide general advice in Tier 1 General Insurance (RG 146) products.
Shaun McGowan is the founder of Money.com.au. He's determined to help people and businesses pay as little as possible for financial products, through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
^Comparison rate warning
Unless otherwise stated, personal loan comparison rates are calculated based on a loan amount of $30,000 repaid over a 5-year term. The comparison rates only apply to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you.
Products, features and information displayed
General information only The information on this page is general in nature and has been prepared without considering your objectives, financial situation or needs. You should consider whether the information provided and the nature of any personal loan product is suitable for you and seek independent financial advice if necessary.
We are not providing you with a recommendation or suggestion about a particular personal loan. You should read the relevant disclosure statements or other offer documents before deciding whether to apply for or continue to use a particular product.
What products, features and information are shown While we make every effort to ensure all personal loans available in Australia are shown in our comparison tables, we do not guarantee that all products are included.
Our product comparisons may not compare all personal loan features and attributes relevant to you. Product information, such as interest rates, fees and charges, is subject to change without notice. Before acting on any information, you should confirm the relevant product information with the lender.
How personal loans are sorted and filtered by default Users can easily change the sort order and apply product filters to our product comparison tables. However, when you arrive on a page initially, by default personal loans are sorted by:
Personal Loans Available Through A Broker
Some personal loan products listed in our tables are available through a broker. These are the products with an option to ‘Check Eligibility on Money.com.au’. Brokers may not be able to offer loans from every provider and there may be more suitable loans for your personal circumstances. Brokers are not authorised by Money's Australian Credit Licence and operate under their own Australian Credit Licence, or as a credit representative of another Australian Credit Licensee. Brokers can make recommendations about loan products that may suit your objectives, financial situation and needs.
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Our tables feature all personal loans available from lenders on our database that match the search criteria selected. Lenders do not pay to feature in our tables, nor do we earn commission if you click to visit a lender’s website. The order of the products in the table is not influenced by any commercial arrangements.
If you get a personal loan as a result of visiting this page, we may earn a commission.
