Variable Rate personal Loans

Did you know that you can get a personal loan with a variable rate? This pages will give you the details of how they work and what to look out for when choosing a variable rate personal loan.

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Advertised ProductProduct Image For MoneyMe - Personal Loan  - Unsecured | Variable

MoneyMe - Personal Loan - Unsecured | Variable

Advertised Rate

From 9.19% p.a. to 23.99% p.a.

Comparison Rate

From 10.58% p.a. to 26.58% p.a.
An advertised rate of 9.19% p.a. and comparison rate of 10.58% p.a.
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Showing personal loans based on borrowing $20,000 over 3 years, showing both secured and unsecured loans, with variable rates
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  • Comparison Rate
  • Advertised Rate

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What is a variable rate personal loan?

A variable rate personal loan has an interest rate that fluctuates with market variations, much like a variable rate mortgage does. So, if the market rate drops, so could your payments, equally if the market rate rises, so can your payments. (more obvious balanced expression)

What can a variable rate personal loan be used for?

The answer to that varies more than the rate will. People take out variable rate personal loans for any number of reasons, but it’s because they want a bit of extra money for a specific purpose, such as:

  • a much-needed holiday;
  • home renovations;
  • work on the car;
  • getting money to invest;
  • replacing or upgrading household appliances;
  • a garden makeover;
  • mending a leaky roof; or
  • paying medical bills.

A personal loan is a way to get things done now, without feeling the sting of a large, upfront cost.

What are the benefits of a variable rate personal loan?

There are two main benefits of variable rate personal loans, compared to fixed rate loans:

  • You could benefit from market fluctuations. If the interest rate is lowered, then your repayments could also go down.
  • Variable rate personal loans are typically more flexible. They usually have no early exit fee, and normally allow you to make additional repayments to cut interest payments and perhaps pay off your loan sooner.

Are there any downsides?

The main downside to a variable rate personal loan is that if the interest rate rises, then so could your repayments.

You have to balance this against the benefits, and work out if a variable rate personal loan will suit your individual needs. For example, if you intend to pay off your loan early, then a variable rate personal loan could be the option that works for you.

What things should I consider when comparing variable rate personal loans?

The Australian Government’s Moneysmart website has good information on things to consider when comparing variable rate personal loans. See the table below for a good start.

Comparison rate- The comparison rate helps you compare loans more accurately. It represents the total cost of the loan, including the interest rate and most of the fees.
- For accurate comparison, make sure you’re comparing the same loan amounts and length of loan. In other words, apples with apples.
Interest rate- This is the rate of interest you’ll need to pay based on the amount you borrow. With a variable rate loan, this could vary with market fluctuations
Application fee- Many lenders charge application fees. You’ll have to check with providers for details.
Additional feesCheck the T&Cs to see what extra fees you may be up for with your loan. Additional fees from one lender may counteract a low interest rate. Some fees to look out for are:

- a monthly service fee; or
- a default or missed payment fee.
Extra repayments- With a variable rate personal loan, it’s likely you won’t be charged a fee for making extra repayments, but it’s always wise to check.
Loan use- Ask what your loan is limited to be spent on, as some loans are only to be used on certain things such as buying a car.
Loan termsThe length of your loan can affect the interest rate you’re offered:
- A shorter loan term typically offers a lower interest rate.
- A longer loan term usually offers lower repayments, but you’d typically end up repaying more interest.
Redraw facility- As with some mortgages, a variable rate personal loan will often allow you to access any additional payments you’ve made into your loan. It’s a useful feature, so check with your lender if you think you need it.
- Being ahead of your payment schedule and having access to the surplus funds is useful, if you suddenly need some extra money.
Secured or unsecured- Check whether the lender requires an asset to be used as collateral for the loan.
- Secured loans typically attract a lower interest rate, however there’s the added risk that if you default on your loan, you could also lose the asset.

How do I apply for a variable rate personal loan?

Once you’re ready to apply, you may need to provide information to the lender, such as:

  • proof of address;
  • recent bank statements;
  • proof of employment and recent payslips;
  • proof of good credit history, like paying your utility and phone bills on time;
  • recent rental or mortgage payment history; and
  • your lender may run a credit check before approval.

In some cases, you may be asked to provide a guarantor, so check out the Australian Government’s Moneysmart page on guarantors in loans to find out what that process involves for both you and the guarantor.

The whole process depends on your individual circumstances and financial position.

So, how do I choose a variable interest rate personal loan?

If you’re ready to compare variable rate 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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