Personal Loans

Finding the ‘Perfect’ Personal Loan Rates

Written by:

Georgia Matthews


June 29, 2020

Last updated

August 12, 2022

Reading time

5 minutes

Georgia Matthews

Georgia Matthews is a contributing Writer at Oiyo. She is currently studying a dual Bachelor of Laws / Bachelor of Arts (majoring in history and psychology) from the University of Queensland. Georgia has worked in a few law firms during her studies and is currently working in a corporate law firm. She is most passionate about writing, history, and travelling.

Interest rates for personal loans

From paying for a holiday to paying off bills, personal loans are often a great financial solution. They can provide that extra bit of cash, whatever your need may be. However, it’s best to shop around to ensure that you are getting the best personal loan rates on offer. Finding the perfect deal for you could save you thousands over the life of your loan.

This article will run you through interest rates, what constitutes a good interest rate, how your personal circumstances will affect your personal loan interest rate and other features of a personal loan.

Tell me more about interest rates

For starters, an interest rate is a small percentage of a loan that lenders will charge in addition to your regular repayments. It is essentially a small charge in exchange for their money lending service, and to compensate for inflation.

It goes without saying that interest rates go up and down constantly due to financial crises, economic booms, inflation, etc. Changes to interest rates are particularly rife in times of crisis. For example, the tumultuous era of the Great Depression and World War II resulted in the authority to determine interest rates to be transferred from the Commonwealth Bank (then the central bank of Australia) to the Reserve Bank of Australia in 1960. In more recent memory, the Global Financial Crisis and COVID-19 significantly slashed interest rates. You’ll likely be aware that in March 2020, the Reserve Bank cut interest rates by 0.25% thanks to the COVID-19 pandemic.

So… what’s a good rate?

Of course, there is no definitive answer to this question. A good interest rate will depend on two key factors:

  1. The market at the time; and
  2. Your personal circumstances.

In 2019, the Reserve Bank reported that most Australians are charged around 14.4% interest on their personal loans (that is, based on a typical, unsecured variable rate personal loan). This should not be taken as gospel, however, as personal loan rates vary significantly depending on a multiple of factors. We have outlined some of these factors below.

Factors that can affect personal interest

Type of interest rate

There are two types of interest rates; fixed and variable interest rates. A fixed rate means that the rate has been agreed upon, and will not change over the duration of the loan. conversely, variable interests rates will change. Depending on the market and your lender, a variable rate can change monthly, quarterly or annually. Though this could work in your favour, it also may not. It’s wise to do some research as to the current market to get an idea as to how interest rates are being affected. Similarly, make a decision depending upon your personal financial habits. Would you prefer certainty in your repayments, which consequently makes budgeting an easier task? Or are you willing to take more of a gamble?

The differences are usually small, as interest rates are unlikely to fluctuate significantly over the course of a personal loan. However, paying the market 4.5% as opposed to the fixed 5% will save money in the long run.


Some lenders may allow you to qualify for low rate personal loans if you are able to provide someone to guarantee the loan. This means that this person legally accepts the risk of your loan, and the lender will come to them to repay the loan if you are unable to.

To note, it is wise to seek free legal advice before agreeing to act as a guarantor. ASIC’s website provides a list of legal centres and agencies that will assist you with this.


Personal loans come in the form of both secured loans and unsecured loans. With a secured loan, you will offer up an asset to act as security for the loan. This means that if you fail to make repayments, your lender can repossess your asset in order to meet the money you owe.

On the other hand, unsecured loans will not require an asset as security. Though this sounds like a better deal, be aware that unsecured loans come with higher interest rates. This is a significant tip, as interest rates can vary by up to 5% between secured and unsecured loans. It’s also worth noting that most lenders won’t offer unsecured loans for amounts over $2,000.

Credit score

Your credit score is typically a number between 0 and 1,200 that represents your creditworthiness to lenders and credit providers. A general rule of thumb is that the higher your credit score, the lower your rate will be. This is because a person with a higher score is considered less risky as a borrower than a person with a lower score. As your credit score is one of the most significant factors in determining personal loan rates, it’s advisable to check your credit score and compare options. Below, we’ve provided a breakdown of credit scores based on Experian’s (Australian credit bureau) rating scale:


833 – 1200

It is highly unlikely that something could harm your credit report in the next twelve months.

726 – 832

It is unlikely that something could harm your credit report in the next twelve months.

622 – 725

It is less likely that something could harm your credit report in the next twelve months.

510 – 621

It is likely that something could harm your credit report in the next twelve months.

0 – 509

It is more likely that something could harm your credit report in the next twelve months.

Interest rates may vary by 2% to 5% between each credit score band. You can access a free annual copy of your credit report from the following credit Bureau’s: Experian, Equifax and Illion (Formerly Dun & Bradstreet).


Though banks and credit unions are often the most popular lenders for personal loans, consider looking beyond the typical means. Oftentimes, online banks and other digital lenders will offer affordable, competitive interest rates when it comes to personal loans. Further, most banks are quite strict with their assessing process and consider a low credit score a large red flag. Fortunately, when the banks say no, an online lender can look past your less than perfect credit score and approve your application based on a number of other factors.

To give you an indication at the time of writing, for a typical, unsecured fixed rate personal loan, the Big Four Banks are charging upwards of 10%. ANZ’s rate is 12.45%; NAB’s is 13.99%: Westpac’s is 11.99%, and Commonwealth’s is 11.5%. Note that these personal loan rates are all advertised as subject to variation depending on many factors.

Employment status

Do you have a steady source of income? Have you been at your job for longer than one year? Are you a casual employee or a permanent employee? Your answers to these questions may provide lenders with an idea as to whether you can afford to repay the loan. The steadier your job and the more secure your employment status, the more likely that you will keep earning income to meet your repayments.

Debt-to-income ratio

If you have previously accumulated a large amount of debt, this may indicate two things. Firstly, you are an unreliable borrower who continues to gain debt without paying it off. Secondly, you may not have the means to repay the lender after you repay your other outstanding debts. Of course, take this with a grain of salt. Many Australians will have large sums of debt due to their house mortgage and/or car loan, for example. Your lender will take a realistic look at the amount of debt you have and what it’s for to come to a conclusion as to your reliability as a borrower. They will also take into account your income. If your income safely meets your other repayments with extra to spare for the new personal loan, then your lender may have no issue in approving your loan.

Your debt-to-income ratio, therefore, may have a significant impact on your personal loan rates. The less likely you will be to repay the loan or the riskier you are as a borrower, the higher the interest rate your lender will most likely offer and vice versa.

Other personal circumstances

The general rule of thumb is that you shouldn’t borrow more than 30% of your credit limit. Doing this shows lenders that you are borrowing an amount that you may reasonably be able to afford. Borrowing more than that may increase the interest rate of your personal loan.

Consider any other factors that are unique to your personal circumstances. For example, you may have a large, looming payment in the future that will affect your ability to repay your loan. Alternatively, there might be external factors that are threatening the stability of your job. At the end of the day, no one knows your financial circumstances better than you do. While it’s always wise you do your research and speak to your lender, only you will be able to tell if certain personal loan rates are the best deal for you.

Tips for getting competitive interest rates

Above we mentioned the factors that may contribute to your personal loan rates. To sum up, however, here is a short list to suggest how you can qualify for lower personal loan rates:

  • Decide whether a fixed or variable rate works best for you;
  • Opt for a secured loan as opposed to an unsecured loan;
  • Consider having someone act as guarantor for your loan;
  • Ensure that you have a good credit score (if not, work to rehabilitate it or use a loan as a gateway to good credit);
  • Choose a reputable lender that offers competitive rates;
  • Ensure you have stable employment with a steady income;
  • Look to reduce your debts; and>
  • Tidy up any other personal circumstances that may affect your ability to qualify for lower personal loan rates.

Most importantly, do your research! Be sure to compare multiple lenders and the many personal loans available. Realistically, this is the only way to ensure that you are getting that ‘perfect’ personal loan rate for you.

Other features of a personal loan

Of course, personal loans aren’t just about interest rates. There are a few other features of personal loans that you will have to consider. These include the amount of money that you choose to borrow, the term of the loan and the frequency of repayments. As the main features that you may have a degree of control over, you should start thinking about them whilst researching loan options.

Further, be aware of other features that lenders may add to your loan. For example, many lenders may charge additional fees, such as establishment fees and exit fees. Different loans also offer different features, such as the option to repay the loan early, refinance or a redraw facility. Keep an eye out for the features that you are after. Lenders are generally quite competitive, so speak to your lender today to see what they are able to offer you.

Looking to do more with your finances?

At Oiyo, we’re trying to change the way we talk about money. We’re not financial advisors, but we can offer helpful insights and information on finance to help you navigate your finances.

We write helpful guides covering everything from personal finance and loans to insurance and investing. Our aim is to make it easy for Australians to have access to simple, to-the-point financial guides. So, whatever financial query it is that you have, Oiyo is here to help!

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