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Personal Loans

1. What Are Personal Loans? | How Personal Loans Work

Personal Loans make it possible for you to borrow money to pay for the likes of home renovations, new cars, study programs, emergency bills, debt consolidation, or once-off expenses like holidays and events.

A small personal loan is somewhere between a credit card loan and a home loan. It’s easier to get approval for a personal loan than a mortgage, and there’s more paperwork involved when you apply for a personal loan than for a credit card. The best personal loans in Australia range from just a few hundred dollars to tens of thousands of dollars, and loan repayment terms on offer usually range from one to seven years.

The ASIC (Australian Securities & Investments Commission) regulates personal lenders in Australia, ensuring that they adhere to responsible lending rules. When comparing loans via, you can rest assured that each of the lenders listed is ASIC regulated too.

While you will find that each lender has its own set of criteria in place, most personal loan applications receive approval in as little as just 60 minutes. In some instances, applicants may need to wait 24 hours. If the loan application is approved, the client can receive the money on the very same day, the next day, or at worst, within seven days of approval.

The Australian government has capped the maximum charges that lenders can affix to certain personal loans. Whether applying for an online personal loan or heading to the local short-term lender’s office, here’s a look at the maximum fees they can charge, according to the ASIC (Australian Securities and Investment Commission).

Loan Amount

Fees Rules That Apply

Under $2,000

Typically paid off between 16 days and one year. 

  • Max of 20% establishment fee.
  • Max of 4% monthly accounting fee.
  • Undetermined government fee.

If you default on your loan repayment, the lender may not collect more than 200% of the total loan amount in costs.

$2,001 to $5,000

Typically paid off between 16 days and two years.

  • $400 once off fee
  • Max 48% annual interest rate including all other fees

Above $5,000

Typically paid off over two years

  • Max of 48% annual interest rate including all other fees

2. Types of Personal Loans

When looking for the best personal loans in Australia, you will find several types available. Before you apply for a personal loan, ensure that it suits your needs and financial situation. To assist with making the right decision, here’s a list of the types of personal loans available:

Secured Personal Loans

A secured personal loan is only granted to an individual with a suitable asset to use as collateral. Suitable assets are the likes of property, cars, or even valuable jewellery. If the client fails to repay the loan, the lender can take ownership of the asset and sell it to cover costs.

This loan type typically comes with a lower interest rate attached as there is less risk to the lender. It’s also easier to receive approval for this type of personal loan than other personal loans, and clients may request a higher loan amount than if they had no collateral to offer at all.

Unsecured Personal Loans

Unsecured personal loans do not require an asset for collateral. This type of loan is trickier to apply for than a secured loan, as you have to prove that you can easily repay the loan. You must provide evidence of steady and regular income (payslips usually suffice). In some instances – especially if it is the first time applying for a loan – applicants may require someone to sign as a guarantor. This reduces the risk for the lender).

Unsecured loans often offer lower interest rates than credit cards. That said, lenders are within their right to take legal action against nonpayers, and the late payment penalty fees are usually relatively high.

Self-Employed Loans

Self-employed loans, typically for sole traders and entrepreneurs, can be challenging to acquire as it’s difficult to prove income and assets. While that may be true, many online lenders will happily provide personal loans to self-employed individuals who can prove their income and provide evidence of two-year tax statements. Due to the high risk to lenders, self-employed loans often come with high-interest rates attached.

Guarantor Personal Loans

Guarantor personal loans are loans provided to individuals who have a qualifying guarantor willing to co-sign the loan agreement. While the loan is opened under the applicant’s name, the guarantor must go through the same approval process to ensure that they can afford to pay the loan if the applicant defaults on payments. One of the biggest perks of a guarantor personal loan is that you can borrow more than if you applied independently. Often, due to reduced risk to the lender, the interest rates are lower too.

Unemployed Personal Loans

For unemployed loan applicants in Australia, all hope is not lost. Lenders may still see you as a viable personal loan candidate if you can prove you have some form of regular income. This can be Centrelink payments, self-employed or freelance earnings, shares earnings, or similar. In addition, lenders may query your financial documents, check your credit history, or ask if you have any assets to use as collateral.

Short-Term Loans aka Payday Loans

Short-term loans or payday loans are typically up to $2,000 (no more than $5,000) paid over 16 days to one year. Repayments are collected weekly, fortnightly, or monthly on your designated payday to ensure that you never miss a payment. To take out a short-term personal loan, you will need to prove your steady income and have a clean credit record. Although, some lenders do provide bad credit personal loans and no credit check personal loans too.

3. Features of a Personal Loan

Personal loans share the following features:

Loan Amount

Most personal loans used for short-term, unexpected, or once-off expenses range from $2,000 to $5,000. However, some lenders do offer personal loans between $5,001 and $55,000. Of course, higher loan amounts mean more interest has to be paid, and your monthly loan instalment will also be higher, depending on how much you choose to borrow.

Term of Loan

Most personal loans in Australia are repaid over two to five years – in some instances, a loan can be repaid over seven years. The government has banned loan repayments in under 16 days.

Capped Interest Rate

The Australian government has capped interest rates on personal loans. The maximum interest rate on a personal loan is 48%, including all fees. That said, most lenders charge between 5% and 23% interest on personal loans.

Repayment Schedule

Personal loans are typically repaid on a monthly schedule via direct debit. It’s best to orchestrate your repayment date on the same day as you get paid to ensure that you never miss a payment.

Fees and Charges

If you apply for a loan under $2,000, lenders can only (by law) charge you a maximum of 20% establishment fees and 4% in monthly charges. On loans of $2,001 to $5,000, the lender can charge a maximum of $400 once-off fee and 48% annual interest. It is much the same for loans of $5,001 and above. These are the maximum charges to expect, so it’s advised to shop around for lenders offering lower fees, charges, and interest rates.

Before agreeing to a loan, pay close attention to contingency fees and charges that the lender may apply, such as charges on late (or early) payments. If you foresee yourself repaying your personal loan earlier than expected, look around for a lender that doesn’t charge a fee on early payments.

Lender Reputation

It may be tempting to grab the first cheap personal loan that comes along but do due diligence before agreeing to anything. The lender’s reputation will tell you if they are the type of lender well-suited to a contract. Transparency is a good indication of a lender’s trustworthiness. For instance, if a lender withholds their telephone number and other contact details, you should practice caution when considering their products.

Reputable lenders make all product information readily available on their web pages and are easily reachable by phone. You can also visit their social media and other online portals to read reviews by past borrowers to get a better idea of who they are, if they are legitimate, and if they are fair to their clients.

Disbursement Time

When applying for personal loans, you obviously need the money in a hurry (in most instances). Reputable and reliable lenders understand this and ensure that the required approvals are provided within minutes. They also ensure that funds are paid out within a few hours – typically with a maximum waiting period of 24 hours. Check the specified daily cut-off times for borrowers to accept agreements and the promised payout waiting times when applying for a loan. For the best service, choose a lender that pays out funds with minimal waiting periods imposed.

4. Examples of Personal Loans


Max Loan Amount

Loan Term


Monthly Service Fees



3 to 5 years

5.35 – 19.09% pa




1 to 7 years

9.99% pa


Pepper Money


1.5 to 7 years

5.95 – 17.95% pa


5. Advantages & Disadvantages of Personal Loans


Quick Cash Payouts

Nobody likes to be kept waiting for a cash loan when applying online. In most instances, if the conditions are met, an online personal loan is paid out on the same day of application. If you are in a hurry for the money or have an emergency to pay for, this can be convenient. However, there are instances where you find you have to wait until the next business day for the money to be disbursed.

Flexible Loan Amounts

When applying for personal loans, you will find that you can loan any amount from $100 to $5,000 (in some cases, you can borrow more). Of course, it’s important to remember that larger loan amounts equate to larger monthly instalments and more interest too.

Quick & Easy Online Loan Application Process

When applying for a personal loan online, the entire process is quick and easy. It shouldn’t take you more than just a few minutes to complete the application, and because the loan review process is automated, you can receive a decision on the very same day.

Small Personal Loans Have No Interest Expense

If you’re applying for a personal loan of more than $2,000, you can expect an annual interest rate charge of anything up to 48%. However, smaller personal loans of under $2,000 do not have an interest expense charge. The 4% fee charged monthly is an account maintenance fee and only incurs until the loan amount has been repaid in full.


Expensive Loan Option Compared to Traditional Banks

Unfortunately, personal loans come with higher interest rates and charges than traditional bank loans. This is because the risk is higher for a lender willing to loan money to individuals unable to acquire a bank loan. The charges are somewhat of a safety net.

6. Eligibility Criteria for Personal Loans

Applicants must be 18 years or older.

You must be a permanent resident of Australia and have a residential address in the country.

Applicants must have a local Australian bank account.

Proof of income must be provided (payslips or bank statements).

If you receive Centrelink payments, more than 50% of your income should come from other sources.

Have a good credit history (this is not always strictly the case as some lenders do grant bad credit loans if you can prove the loan’s affordability).

7. The Application Process When Applying for Personal Loans

If you choose to apply for a personal loan online, this is the process to follow:

Step 1: Compile the relevant documentation

When applying for a payday loan through, you will be required to provide certain documents for the lenders to approve. Here’s what you should have ready when you apply:

Identification (a driver’s license and medicare information also suffices).

Your banking details (to set up a direct debit).

Payslips for the last three months.

Three months bank statements.

Step 2: Complete the application form

While you can apply for your loan at the branch of your chosen lender, an online application through is much more convenient (and faster too). Simply fill out the form with your personal particulars and submit it. Of course, you must be honest and accurate when completing a loan application form. Incorrect information could cause a delay in the approval and disbursement of your loan.

Step 3: Wait to hear back from the lender

Once you have finalised the application and sent it through, you need to wait to hear back from the lender. In some instances, the lender will require further information. As they verify your information, they may request that you submit additional documentation. Once all the documents are received, the lender will decide – your loan will be approved (or, in some instances, rejected).

If the lender decides to approve your loan application, they will send you a loan agreement. It is vitally important to carefully read through all the terms and conditions of the loan before signing the document and sending it back to the lender.

Step 4: Wait for the lender to pay out your money

Step 4 is the most exciting part of the process as it means your money is on the way. The lender has accepted your loan agreement and will advise you how long to wait for the cash to appear in your bank account. In most instances, this happens on the very same day as your loan is approved.

8. FAQ's

How much can I borrow for a personal loan in Australia?

Most personal loans in Australia range from $100 to $5,000, but there are instances where individuals can acquire personal loans of up to $55,000 to pay for a vacation, home renovations, or similar.

Can I apply for a personal loan if I am self-employed?

Yes, you can get a personal loan if you are self-employed. You need to ensure that your financial documents are up to date and readily available. You must prove that you have a steady stream of income and that the loan amount you are applying for is affordable. In addition to this, it’s important that your taxes are accurate, up to date, and paid in full. If you have a good credit history and can show that you have some form of savings, it will make you a more attractive candidate for a personal loan.

Can I apply for a personal loan if I am receiving Centrelink payments?

Yes, it is possible to apply for a small personal loan if you receive Centrelink payments provided you meet the minimum income requirements. However, it’s also essential to check with the lender if your specific type of Centrelink income is acceptable, as not all are. In most instances, as long as 50% of your income is from a source other than Centrelink or government benefits, you should be able to apply for a loan successfully.

Will I be penalised for paying off my loan amount early?

Some lenders allow early payments of loan amounts with no penalty, whereas others will impose a penalty fee for early settlement. Each lender’s terms and conditions are different, and as such, it is advised that you check with the lender on their early settlement policy before signing the loan agreement.

Can I get a personal loan if I have bad credit?

While a good credit history will ensure an easier application process, some lenders will provide a personal loan to people with a poor credit history. If you have bad credit, ensure that all your documents prove that you can afford the loan repayments and have a stable income stream. If you’re struggling with debt and find you are juggling bills, it’s probably not a good idea to take out a personal loan. You can get financial advice and support from Financial Counseling Australia (FCA).

How much would you like to borrow?

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100% Safe and secure. Apply with confidence, your privacy is always protected.