Looking for a way to consolidate debt or borrow funds for a big or unexpected expense? A personal loan can get you there.

Learn more about personal loans, who’s eligible, and what’s involved, before you apply for a loan.

A personal loan enables you to borrow funds from a lender upfront, and pay the amount back over time. Unlike other specific types of loans, borrowed funds with a personal loan can be used in a variety of ways, such as for debt consolidation, to pay for home renovations, or to cover the cost of unexpected medical bills.

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Personal loans offer flexibility concerning what they can be used for. Funds borrowed on a personal loan can be used for virtually anything - here are some examples of what personal loans are commonly used for:

  • Expenses for significant events such as holidays, renovations, weddings, or moving costs
  • Debt consolidation, where multiple sources of debts can be combined into repaying the personal loan
  • Costs that result from an emergency like medical bills, or essential item purchases such as a new fridge or appliance
  • Buying a vehicle when a car loan isn't suitable for you

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Like other types of loans, you borrow a sum of money and pay it back over an agreed period, with interest. Terms vary based on the loan, the lender and your creditworthiness. Compare options and understand the terms and fees before you commit to any loan.

In a secured personal loan, an asset you own, such as a car, will be used as collateral. If you do not make your repayments, the lender can sell your secured asset to get their money back.

An unsecured personal loan doesn't require collateral as security, but you can expect to pay higher interest.

Personal loans can have a fixed (stays the same month to month) or variable (moves with the market) interest rate. These loans may also have fees for application, ongoing, and early repayment. You can usually make additional payments, but there may be penalties.

Some personal loans offer no interest rates, but this usually applies to purchases under a couple of thousand dollars, with strict eligibility criteria.

How to choose a good personal loan

Here are the key aspects you should look for in a personal loan:

  • Interest rate – lower interest rates will result in lower overall repayment costs
  • Repayment terms – look for comfortable and flexible repayment options
  • Fees – some loans may include hidden fees such as prepayment penalties
  • Loan amount – to minimise the cost of borrowing, don't borrow more than you can afford to repay
  • Lender’s reputation – look at the lender’s customer reviews and policies to determine their reliability of service

Before you decide on a personal loan, make sure to compare multiple loan offers and read the fine print to understand what you are committing to. A mortgage broker can help you find the best loan for your situation, and can offer guidance to help you land the right loan.

Despite the flexibility that a personal loan offers, it’s not always the best choice for your situation. There could be a different type of loan that is better for funding your purchase. To find a broker, search our broker directory.

What do I need to get a personal loan?

In Australia, you would typically need to:

  • be at least 18 years old
  • provide proof of identity with a passport or driver’s licence
  • have a stable income
  • show evidence of residence in Australia
  • have a good credit history 

Lenders may consider your employment history, debt-to-income ratio and overall financial stability. It’s essential to compare loan options from different lenders as eligibility criteria and interest rates may vary. This is where a broker can be useful.

Frequently Asked Questions for Personal Loans

General limits include funds of up to $100,000 with a secured personal loan, or up to $50,000 with an unsecured personal loan.

The maximum borrowing amount for your personal loan application will vary depending on your lender, credit history, and income. Lenders will usually look at your debt-to-income ratio (DTI) when determining how much you can borrow.

It’s possible for your credit score to dip slightly when taking out a personal loan. However, this decrease will naturally recover as you make on-time repayments. When you fully repay the loan, your credit score will typically be restored to its original level from before you took the loan.

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