Unsecured Personal Loans

If you need money in a hurry, an unsecured personal loan could be the answer. It could be to fix up a leaky roof, replace a broken oven, or to take a much-needed holiday. This page gives you the low-down on unsecured loans and we’ll help you compare loans to find one that suits you.

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Advertised ProductProduct Image For OurMoneyMarket - Personal Loan - Unsecured | Fixed

OurMoneyMarket - Personal Loan - Unsecured | Fixed

Advertised Rate

From 6.57% p.a. to 18.99% p.a.

Comparison Rate

From 7.19% p.a. to 21.78% p.a.
An Unsecured loan with an advertised rate from 6.57% p.a. and comparison rate from 7.19% p.a.
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Showing personal loans based on borrowing $20,000 over 3 years, showing unsecured only loans, with fixed and variable interest rates
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What is an unsecured personal loan?

A lot of loans are ‘secured’, which means you provide an asset of some description as security for the loan. A loan for a car will often be secured by the car itself. If you default on your payments, then the asset can be repossessed by the lender and sold to recover some of their losses.

Other times, there may not be an asset required with which to secure the loan. These types of personal loans are referred to as ‘unsecured’.

How do unsecured personal loans work?

Like any personal loan, an unsecured personal loan is generally granted when you borrow a relatively small amount of money from a lender.

You’ll normally have to pay it back within a set period, up to 7 years.

Whereas interest rates for personal loans can be as low as between 4 and 8 percent, you might find that an unsecured loan attracts a slightly higher interest rate. This is because an unsecured personal loan is not secured by any asset, so generally the risk to the lender is greater.

Some lenders may ask you to provide a guarantor for your unsecured loan, especially if this is your first.

What factors can affect how much I can borrow?

Personal loans vary, and can be anywhere from $2,001 to around $100,000.

The amount you can borrow is affected by several factors, such as:

  • your income and employment status;
  • your outgoings;
  • your credit rating;
  • Any other outstanding debts
  • whether you own or rent your home
  • whether you have any dependents.

What can an unsecured personal loan be used for?

As mentioned earlier, you may require money in a hurry for a number of reasons. Some lenders may require details of what the funds are to be used for, and in some cases may set mandatory conditions for the use of the loan funds. For example, if you’re using the funds from your unsecured loan to finance home renovations, the lender may stipulate in the agreement that the funds can only be used for that purpose and nothing else. That said, here are some of the expenses you may be able to finance with an unsecured personal loan:

  • holidays;
  • paying medical bills;
  • funds for investment;
  • renovations or work around the house; or
  • furniture and appliances.

An unsecured personal loan at a low interest rate could let you enjoy these things now and help spread the cost over a set period of time

Are there any other loan options?

One other option is a secured personal loan. This is where you provide an asset that is used as collateral for the loan. With this loan option, a lender can seize the asset and sell it to recoup losses if you default on your loan.

As mentioned earlier, a secured personal loan typically has a lower interest rate than an unsecured loan, as it is perceived as lower risk for lenders.

What are some factors worth considering when comparing unsecured personal loans?

You’ll find a lot of extra valuable information on the Moneysmart website, but in general these are factors you can consider when taking out a personal loan:

  • Comparison rate:

    The comparison rate is important, as it represents the total cost of the loan and includes the interest rate as well as most of the fees. As the name suggests, it helps you compare costs across different loans, without having to look for all the fees in the small print.

  • Interest rate:

    This is the percentage of the loan amount that you will pay in interest. It does not include additional fees etc.

  • Application fee

    Some, but not all lenders charge an application fee when you take out a personal loan.

  • Are there additional fees?

    Check before you borrow. Your loan may include a monthly service fee, for example. There may also be fees for missed payments. Check with your lender and see what other fees you may be up for. It could change the affordability of a loan.

  • Can you make extra repayments

    If you come into some extra money, you may want to pay down your loan, or pay it off altogether. This can save you a fair bit of interest, but it also may attract an additional fee. Check with your lender before you sign up for the loan.

  • Limitations on loan use

    Some loans can be used only for specific things, like buying a car. Make sure you can spend your loan on the things you want.

  • Length of loan

    Remember that the longer the loan term, the more interest you’ll end up paying. It’s wise to work out what is the shortest length of time you’ll need to pay off your loan, without putting too much pressure on your finances.

It’s important to factor loan repayments into your overall budget

When planning to take out a personal loan, it’s important to look at how repayments will fit into your overall budget. Start by working out how much you’d like to borrow, and how much your monthly repayments could be.

First, make a list of all the recurring payments you have each month or year, things like:

  • rent or mortgage;
  • food;
  • electricity and gas bills;
  • car running costs;
  • insurance;
  • travel costs;
  • memberships;
  • streaming services; and
  • phone payments.

After all your outgoings have been deducted from your monthly income, you should get an idea about how much you can afford to pay back to a loan.

Just make sure you remember every outgoing you have, otherwise you could find yourself out of your depth.

The basic rule is, don’t borrow more than you can afford to pay back, without having to stress about it.

Do my repayments remain constant?

That depends on whether you opt for a variable or a fixed interest rate.

  • Fixed rate. A fixed interest rate won’t vary over a fixed amount of time, so neither will your repayment amounts during that time. This can be for the life of the loan, or an agreed period, like 12 months.

A fixed rate can help you budget with more accuracy, as your payments won’t be affected by changes in interest rates. The downside is that should interest rates come down in that time, you could miss out on the lower payments.

  • Variable rate. With a variable rate, your repayments can vary with the fluctuating interest rate. You could get to take advantage of any interest rate decreases, but should the rate increase, then so may your repayments.

What is the frequency of repayments?

Typically, this can be fortnightly or monthly, whatever is set out in your loan agreement. It varies between loan providers and between the type of loan you choose. Consider a payment plan that’s going to allow you to make your payments on-time, without causing you financial worries.

Are there loans with no interest?

Yes, these no-interest loans are generally offered by lenders under the ‘No Interest Loan Scheme’ (NILS). These loans help people who are struggling financially, to get back on their feet. They are typically a source of safe, affordable credit for low-income individuals or families. For details of eligibility criteria and how to apply, go to NILS for more information.

The Australian Government’s Moneysmart website can also help with more information on no-interest loans.

What is a no-interest loan used for?

No-interest loans are for day-to-day things, like essential household appliances, schoolbooks, medical services or the like. Not luxury items, just things that we need to get by.

Who is eligible for NILS?

NILS has full details on eligibility, but to start with you’ll need to:

  • earn less than $45,000 a year after tax; or
  • have a Pensioner Concession Card; or
  • have a Healthcare Card; and
  • have the ability to repay the loan; and
  • have lived at your current address for at least 3 months.

Is there a loan to help after Covid?

If you’ve suffered financially due to Covid19, you may be eligible for the Household Relief Loan: a no-interest loan of up to $3,000 to help pay rent, utilities and general household costs. Click Household Relief Loan to check your eligibility.

Interested in a low interest, unsecured loan?

If you’re ready to compare unsecured personal loans, you can start here online with iSelect.* See the range of providers and simply click on an option that suits you to begin your application.

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