Personal Loans

Finding a low-interest personal loan in Australia can significantly reduce your debt and overall cost of borrowing.¹ A lower interest rate translates directly into less money paid to the lender, making repayment more affordable.

Juggling multiple personal loans, credit card debts, and other borrowings can be a source of significant financial stress. A debt consolidation personal loan can simplify your finances, reduce your monthly repayments, and potentially save you money on interest.¹

Securing Low-Rate Personal Loans in Australia

When looking for a personal loan, the best rates are often offered to borrowers with a strong credit history.² Lenders view these borrowers as lower risk and reward them with more favourable interest rates.

Key Low-Rate Loan Types

Note: The actual interest rate you are offered is personalised and based on your credit score, financial situation, and the lender’s criteria.

Tips for Getting the Best Rate

1. Check Your Credit Score: Know your score before you apply. A higher score dramatically improves your chances of getting the best rates.
2. Compare Comparison Rates: In Australia, the Comparison Rate is crucial as it includes the interest rate and most fees and charges, giving you a better picture of the loan’s true cost.³ Always compare the comparison rate, not just the advertised interest rate.
3. Shop Around: Different lenders, including banks, credit unions, and non-bank lenders, offer varying rates.⁴ Use comparison websites to quickly assess multiple options.

Consider a Secured Loan: If you have an asset like a car, securing the loan with it can substantially reduce the interest rate.⁵

How to Boost Your Credit Score in Australia: A Practical Guide

A strong credit score is a crucial factor in your financial life, influencing your ability to get a loan, the interest rate you’re offered, and even securing utilities or phone contracts. In Australia, your credit score is a number representing your creditworthiness to lenders, with higher scores indicating a lower risk.

Here is a guide on practical steps you can take to improve your credit score, referencing information available from reputable sources.

1. Get to Know Your Credit Report and Score

The first step to improving your score is understanding where you stand. You have a right to a free copy of your credit report every three months from Australia’s main credit reporting bodies (CRBs), or if you’ve been declined credit in the last 90 days [Source: Moneysmart.gov.au].

• Order Your Report: The three main CRBs in Australia are Equifax (formerly Veda), Experian, and illion. It’s wise to check your report from at least one of these agencies.
• Check for Errors: Carefully review the report for any inaccuracies, such as:
  • Loans or debts that are not yours.
  • Incorrect personal details (name, date of birth, address).
  • Defaults that have passed the time limit for reporting.
• Fix Mistakes: If you find a mistake, contact the relevant credit reporting agency and ask them to fix it. This is a free service you can do yourself. Be wary of companies that charge a fee for a service you can perform for free [Source: Moneysmart.gov.au].

2. Prioritise On-Time Repayments

Repayment history is one of the most critical factors impacting your credit score. Under Australia’s Comprehensive Credit Reporting (CCR) system, your credit report includes a 24-month history of whether you have made your loan repayments on time [Source: Experian Australia, Equifax Australia].

• Pay on or before the due date: Ensure you make all payments on time for credit products like mortgages, personal loans, and credit cards.
• Be aware of missed payments: A payment not made within 14 days of the due date may be recorded as a missed payment, which can harm your score [Source: Moneysmart.gov.au].

Utilities and Telcos: Defaults on utility bills (phone, internet, energy) and credit cards or loans can appear on your credit report [Source: 9 News Australia via YouTube].

Consolidate Your Debts: A Smart Guide to Personal Loans in Australia

What is Debt Consolidation?

Debt consolidation is the process of combining several debts—such as credit cards, smaller personal loans, and store financing—into a single, new loan.²

The primary benefits are:

• Simplified Payments: Instead of managing multiple payments with different due dates, you only have one loan repayment to worry about each month.
• Lower Interest Rate: If your existing debts have high interest rates (like many credit cards), consolidating them into a new personal loan with a lower rate can significantly reduce the total interest you pay over the long term.³
• Clearer Repayment Timeline: A consolidation loan often has a fixed term, giving you a specific date for when you’ll be debt-free.⁴

Before consolidating, it is crucial to compare the new loan’s interest rate and fees (application, monthly, or early exit) against the total cost of your existing debts.⁵ If the new loan’s overall cost is higher, it may not be a beneficial move.

Personal Loan Rates for Debt Consolidation in Australia

Interest rates for personal loans in Australia are typically calculated based on your credit score and financial profile.⁶ Debt consolidation loans often fall under the category of unsecured personal loans, though secured options (e.g., against a vehicle) may offer lower rates.

Below is an indicative snapshot of competitive personal loan rates for debt consolidation, compiled from market comparisons (Sourced from: Money.com.au and Canstar):

Note:These rates are indicative “from” rates, typically offered to borrowers with an “exceptional” or “A++” credit history. Your final rate will depend on your individual circumstances, credit history, and the loan term/amount. Rates correct Oct 2025

Australian Government and Free Services to Reduce Debt Burden

The Australian government does not directly negotiate with private lenders on your behalf, but it funds or supports free services that provide crucial advice and help you negotiate repayment terms due to financial hardship.

The key resource is the:

• National Debt Helpline (NDH): The NDH is a free, confidential, and independent service providing professional financial counselling.⁷ They offer step-by-step guides on how to manage debt and, critically, how to negotiate payment terms with your creditors.⁸ This process is often referred to as seeking a ‘hardship variation’ with your lender.⁹
  • Website Reference: National Debt Helpline: Welcome Page
  • Related Government Source: The Australian Securities and Investments Commission’s (ASIC) Moneysmart website also strongly recommends using the NDH and explains the process of seeking “financial hardship” assistance directly from your lender, and where to go if you can’t reach an agreement (like the Australian Financial Complaints Authority – AFCA).¹⁰ Moneysmart.gov.au – Financial hardship

If you are struggling to make payments on any loan, the first step is always to contact your lender’s dedicated hardship team to request an arrangement. If that fails, the NDH and External Dispute Resolution schemes like the Australian Financial Complaints Authority (AFCA) can step in to assist.

Lenders Offering Interest-Free Periods

When discussing personal loans, an “interest-free period” in the traditional sense is rarely offered by commercial lenders for consolidation purposes. However, there are two important distinctions to be aware of:

1. No Interest Loan Scheme (NILS)
This is the most common form of interest-free borrowing in Australia. It is a community program designed to provide safe, fair, and affordable finance to people on low incomes.¹¹

• How it Works: NILS offers loans of up to $2,000–$3,000 for essential goods and services (like whitegoods, car repairs, or medical costs) with no interest, fees, or charges.¹² You only repay the amount borrowed.
• Eligibility: Generally, you must be a low-income earner (less than $70,000 gross for singles or $100,000 for couples/people with dependants) or hold a Health Care/Pension Card.¹³
• Lender/Provider: The scheme is provided by community organisations like Good Shepherd and is supported by major banks (like NAB) and the government.
  • Website Reference: Moneysmart.gov.au – No interest loans
  • Scheme Administrator Reference: Department of Social Services – Loans and savings

2. Credit Card Balance Transfers
While not a personal loan, a credit card balance transfer is a common way to secure an interest-free period for debt consolidation.

• How it Works: Many financial institutions offer credit cards with 0% interest on the balance transferred from another credit card for an introductory period (e.g., 6 to 36 months).
• The Catch: An initial balance transfer fee (often 1% to 3% of the amount transferred) is usually charged. Crucially, if you don’t pay off the entire transferred balance before the interest-free period ends, the remaining debt will typically be charged at a very high interest rate (the standard cash advance or purchase rate).
• Lender/Product Examples: Financial comparison sites often list cards with 0% interest balance transfer offers from institutions across Australia.
  • Website Reference: Finder – Interest-free Personal Loans (references balance transfer credit cards)

Summary of Best Loan Consolidation Practice

To successfully consolidate your personal debts:

1. List Everything: Compile all your existing debts (amount owed, interest rate, and term).
2. Shop Around: Use comparison websites to find a personal loan with an interest rate and comparison rate significantly lower than your current average.¹⁴
3. Check the Fees: Ensure the new loan’s fees (establishment, monthly, or exit) don’t wipe out your interest savings.¹⁵
4. Seek Free Advice: If you are in genuine financial hardship and can’t find a solution, contact the National Debt Helpline (1800 007 007) for free, independent, and professional advice.¹⁶

Why Extending Your Mortgage, for some, Beats Personal and Payday Loans

When faced with a significant expense, an unexpected bill, or the desire to consolidate high-interest debt, homeowners often consider several borrowing options. For those with sufficient equity, extending a mortgage—through a top-up, refinance, or Home Equity Loan—typically stands out as the most financially sound choice compared to taking out an unsecured personal loan or, far more dangerously, a payday loan.

The core benefit of securing debt against your home is the significantly lower cost of borrowing.

The Benefits of Mortgage Extension (Additional Borrowing)

Extending your existing mortgage or taking out additional borrowing secured against your home offers three primary financial advantages: lower interest rates, longer repayment terms, and effective debt consolidation.

1. Low Interest Rates

A mortgage is a secured loan, meaning the loan is backed by an asset—your home. Because the lender can repossess the property to recover the debt if you default, the risk to them is lower. This is reflected in the interest rate offered to the borrower.

Compared to unsecured lending, rates on a mortgage extension are generally much lower. This is a crucial factor, as a lower interest rate means more of your monthly payment goes toward reducing the principal balance, rather than just covering interest charges.

2. Longer, Manageable Terms

When you borrow more on a mortgage, the new amount can often be repaid over a long period, potentially matching the remaining term of your current mortgage, which could be 10, 15, or even 30 years [Source 2.5]. A longer term drastically reduces the size of the required minimum monthly repayment, making the debt more manageable and easing immediate financial pressure.

However, it is vital to remember that extending the term means you will pay interest on the borrowed amount for a longer time, which increases the total amount of interest paid over the life of the loan [Source 1.4].

3. Efficient Debt Consolidation

One of the most common and effective uses for additional mortgage borrowing is debt consolidation. By rolling higher-interest debts (like credit card balances or existing personal loans) into your lower-interest mortgage, you can streamline multiple payments into a single, lower monthly repayment [Source 2.5]. This can simplify your finances and lead to substantial savings on interest charges over time [Source 1.1].

Final Considerations: The Major Risk

While extending your mortgage offers clear financial benefits in terms of cost and repayment flexibility, it carries the most significant risk: your home. Any borrowing secured against your property means your home is used as collateral, and failing to keep up with the repayments will put the property at risk of repossession [Source 1.5]. This is why financial experts recommend exploring all other options before securing any debt against your home [Source 1.4].

Comparing Options: Personal Loans and Payday Loans

While additional borrowing on a mortgage offers the lowest interest rates, it is not available to everyone or for every borrowing need. It is essential to understand how other options stack up.

Personal Loans: The Middle Ground

A personal loan is typically an unsecured installment loan (not backed by collateral), although some are secured.

• Interest Rates and Term: Personal loans have shorter terms (e.g., 1 to 7 years) and their interest rates are generally higher than a secured mortgage, but significantly lower than a payday loan [Source 1.2].
• Credit Impact: Unlike payday lenders, personal loan providers assess your credit history and ability to repay. On-time payments on a personal loan can help improve your credit score [Source 1.2].
• Risk: The risk of repossession is absent for an unsecured personal loan, but defaulting on the loan can lead to severe damage to your credit score and legal action from the lender.

Payday Loans: A Dangerous Financial Trap

Payday loans are a type of short-term, small-amount credit with exceptionally high costs and are widely considered a last-resort option due to the extreme financial risk they pose.

• Usurious Interest Rates: Payday loans are notorious for their predatory fees and interest rates, which can average around 400% APR and in some cases climb as high as 780% [Source 1.2].
• Short-Term Trap: These loans are intended to be paid off quickly—often within two weeks—usually by the borrower’s next pay packet. The ease of access comes with the danger of a debt cycle: if the borrower cannot repay the full amount on the due date, high fees are added, forcing the borrower to “roll over” the loan, increasing the debt to a level that becomes extremely difficult to pay off [Source 1.2].

Hidden Fees: Beyond the interest, a single payday loan can be subject to high application fees and other charges, which can quickly add hundreds of dollars to a relatively small loan amount [Source 3.1].

Reference List and Links

[Source 1.1] National Debt Helpline: Home Loan Help Mortgage Relief & Hardship Assistance

[Source 1.2] Investopedia: Payday Loans vs. Personal Loans: What’s the Difference?

[Source 1.4] Moneysmart.gov.au: Debt consolidation and refinancing

[Source 1.5] Legal Aid NSW: Loans and credit cards

[Source 2.5] Halifax: Borrow More On Your Mortgage

[Source 3.1] Finance Beagle: Avoid getting bitten by pay day loans