You need to meet some basic requirements to apply for a personal loan in Australia. These requirements include being at least 18 years old, holding rights to live and work in Australia, and having proof of a regular source of income.
Meeting these requirements does not guarantee approval — getting approved for a personal loan will depend on the lender’s evaluation of your personal finances and ability to repay the loan.
A personal loan in Australia generally has a maximum borrowing amount between $10,000 and $50,000; this limit will vary on each lender’s terms. While this limit is usually advertised upfront by lenders, the actual maximum amount that borrowers may be able to borrow will depend on how favourable their credit history and rating are.
Past records of successful repayments, a higher credit rating, and fewer instances of financial difficulties contribute to a reliable profile for borrowers, which in turn gives borrowers more confidence to loan higher funds on a personal loan. Conversely, borrowers who have previously defaulted on a loan or even declared bankruptcy in the past will have significantly lower borrowing power.
Personal loans are usually offered with unsecured terms, meaning that borrowers are not required to provide any financial collateral for the loan. That being said, some lenders do offer secured personal loans to borrowers — secured personal loans will require borrowers to put down personal assets (like a car or home equity) as loan security in exchange for higher borrowing amounts or better interest rates.
The difference in loan terms between secured and unsecured personal loans can be stark; borrowers are advised to consider both options carefully and apply for the type of personal loan that best fits their circumstances.
In addition to the cost of interest, a personal loan may also come with a range of associated fees that borrowers should budget for:
- Loan set-up fee – charged as an administrative cost for processing and assessing the loan application.
- Service fee – a recurring fee that lenders charge for managing the loan on the borrower’s behalf.
- Early repayment/exit fee – an additional fee that is payable when borrowers decide to pay off their loan in advance or in full before the end of the loan term.
- Insurance cost – refers to the fee paid for loan protection insurance that covers borrowers in the event they become unable to repay their loan due to emergency situations such as unemployment or medical reasons.
- Withdrawal fee – a fee that is payable when borrowers decide to withdraw additional funds from the existing loan.
Think about how you’re going to repay the loan before you apply. Consider how often you can make repayments, the amount of payment you can afford to consistently repay without straining your finances, and how long it will take to repay the loan in full.
Doing this early on helps to avoid a situation where you become unable to make repayments, which will not only incur additional costs but will also affect your ability to take out other loans in future. There are online repayment calculator tools that make it easy to determine the best loan terms for your borrowing needs.
Once the funds from a personal loan have been transferred, they can be used in whatever way borrowers wish. Some of the most common uses of personal loans include:
- Wedding costs
- Home renovation costs
- Funds for a holiday trip
- Repair costs for a vehicle
- Debt consolidation
- Medical expenses
There is generally no limitation on how the funds from a personal loan can be used — borrowers can even decide to split the use of funds across different needs as required.
It should go without saying that the terms of a personal loan will vary from lender to lender — some may offer more flexible repayment terms, while others may offer variable interest rates for a period of time.
As a borrower, the key to getting a personal loan that perfectly suits your needs comes with understanding the options available to you. If you are planning to apply for a personal loan for the first time, it’s recommended that you work with a loan broker who can source a variety of personal loan options on your behalf and provide you with the right advice for your financial needs.
