Written by A fixed rate personal loan is one of two types of interest rate which can apply to personal finance agreements, with the other being variable interest. Under this type of loan, the interest rate offered at the beginning of the loan is locked in and remains the same throughout your repayment period, regardless of the length.
This means the cost of your repayments will remain consistent, allowing you to budget around your repayments with more confidence and accuracy. You’ll know to set aside a certain amount each pay cycle to dedicate to your loan repayments.
When it comes to finding the best available fixed rate deal, Savvy is here to help. With our trusted lending partners and expert team of consultants, we'll be with you every step of the way to lock in a loan to suit your circumstances.
Why compare personal loans with Savvy?
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How should I compare fixed rate personal loans?
There’s a variety of factors which should be considered when comparing the best fixed rate personal loan options for your needs, including:
- Interest rate: of course, your interest rate will be a major factor in determining the cost of your loan. You should always aim to secure the lowest possible rate, as even small differences can result in hundreds of dollars in savings, if not more.
- Loan amount: of course, you’ll need to ensure that you can actually borrow the amount you’re looking for as per your lender’s requirements. There’s no use entertaining offers from lenders who set their maximum loan amounts below what you need, for example. Unsecured loans can range from as little as $5,001 all the way up to $75,000 when you apply through Savvy.
- Loan terms: similarly, you should always stick to lenders who can accommodate your preferences in terms of your repayment period, as it’s important to ensure you give yourself the best chance of paying off your loan without any issues. Not all lenders will offer terms as short as one or as long as seven years.
- Fees: while there isn’t a long, detailed list of personal loan fees compared to other types of finance, it’s still important to consider establishment and ongoing charges when comparing. All personal loans will come with a comparison rate, which combines any establishment and ongoing fees with your interest into a single rate.
- Repayment flexibility: some lenders will allow you to make additional repayments and pay off your debt ahead of schedule without charging a fee, which can save a considerable amount of money. However, this won’t always be the case, which is why it’s important to compare if you want to have this option available to you.
- Eligibility: one of the most important things to be sure of prior to submitting your application is whether you’re eligible for the deal. Generally, the key points to meet are in relation to your age (18 or over), residency (citizen, permanent resident or eligible visa holder), employment and income (earning at lease $20,000 p.a. from stable sources, though some lenders will require more) and credit (no defaults, bankruptcy or court judgments).
How much will my fixed rate personal loan cost?
The cost of your personal loan will be determined by a variety of factors, including the following:
- Interest: as mentioned, the higher your rate, the more you’ll have to pay overall.
- Fees: the same applies to fees, so seeking out loans with low or no fees will help your hip pocket.
- Loan amount: larger loan sums will attract more interest.
- Loan term: the faster you repay your loan, the less interest you’ll be required to pay overall.
- Whether you make early payments: making additional repayments above the minimum required amount will help you clear your debt sooner and save on you interest.
The following table demonstrates how much lower rates can save you in interest over the life of your loan:
| Loan amount | 7.50% p.a. | 8.50% p.a. | 10.00% p.a. |
|---|---|---|---|
|
$20,000 |
$4,046 |
$4,620 |
$5,497 |
|
$30,000 |
$6,069 |
$6,930 |
$8,245 |
|
$50,000 |
$10,114 |
$11,550 |
$13,742 |
Calculations based on a loan repaid monthly over five years.
What can I use a personal loan for?
Unlike home or car loans, which are required to be used for the asset they’re purchasing, you can make use of your personal loan funds for a variety of different purposes. Some of the more common reasons people take out personal loans include:
- Consolidating outstanding debts into one payment, especially those which come with varying schedules and high interest rates
- Covering the cost of your dream wedding
- Helping out with planning your next holiday, regardless of whether it’s a trip up the coast or an expansive overseas getaway
- Giving you the funds you need to pay for any unexpected medical expenses, both for your family and your pets
- Paying for home improvements and renovations around your property
- Purchasing a vehicle which may not qualify for standard secured car finance, such as one which is older than 25 years
What are the pros and cons of fixed rate personal loans?
The differences between fixed and variable interest rates
Performance across the loan
Before all else, it’s important to understand the difference in how these two types of rates work. While fixed interest rates remain the same throughout the term, variable rates are left open to fluctuation. This can open you up to savings if market conditions are right, but you may end up paying more for your loan if rates increase during your loan term.
Base rate
Whether fixed rates offered by lenders are higher or lower than variable rates at the point you apply for your loan will depend on the state of the Australian finance market. Lenders may set their minimum fixed rates at a higher level than variable rate minimums when they expect rates to increase, as they won’t receive the same benefit from their customers paying at a rising rate across their term. The reverse is true if rates are set to fall.
Budgeting
One of the primary benefits of a fixed rate is its accuracy when it comes to budgeting, as mentioned, but the opposite can be true for variable rates. If you take out a personal loan during a particularly turbulent period in the market for rates, your repayments could, in theory, experience change with every instalment. If you value certainty when it comes to making repayments, fixed rate finance is the best option for you.
Potential savings
Whether you’ll enjoy savings under either a fixed or variable interest rate is contingent on how your lender’s rates perform throughout your term. Taking out a loan with a fixed rate when the market is at a low point will protect you against having to potentially pay hundreds of dollars more, while a variable rate established just prior to a fall in rates could help reduce your overall outlay significantly.
Speak to a professional
Most personal loans in Australia enable borrowers to make extra payments on top of the minimum required amount. However, while some fixed rate loans may charge you to do so, this generally isn’t the case with variable rate loans. Making additional repayments can help you save a significant amount throughout your agreement. For instance, by contributing an extra $100 each month to your $20,000, five-year loan at 8.50% p.a., you’d save $1,109 and have your loan repaid over a year sooner.
The types of Personal Loans
Personal loan repayment calculator
It’s important to have an idea of what different loans might cost you overall before you apply. Fortunately, Savvy’s personal loan repayment calculator is simple to use and tells you everything you need to know about how much different offers might add up to overall based on a variety of different factors.
Apply for your personal loan online
Personal loan eligibility and documentation
Common fixed rate personal loan questions answered
Personal loans usually come with a set of fees that you’ll be required to pay as part of your agreement. These include:
- Establishment fee: up to $595
- Ongoing fees: up to $10 per month
- Late payment fees: from $15 to $35
It’s important to note that some lenders don’t charge either an establishment fee or monthly service fees (while some charge neither), so comparing lenders who offer low- or no-fee loans is a great way to help you save a meaningful amount in the long run.
Generally speaking, it’s best not to have multiple loans at the one time. As an alternative – and depending on your lender – you may be able to redraw from your current loan. However, you must be ahead on your repayments (i.e. made extra payments) for this to be an option.
You may also be able to apply for a ‘loan top up’. This is effectively an extension of your loan and, if approved, will increase the amount you owe. However, you need to be aware that this will be another credit application and could affect your credit history.
While the amount you can borrow on a personal loan can vary from as little as $2,001 to as much as $75,000, it’ll ultimately depend on a range of factors. These include:
- Your income and employment/pay stability
- Your expenses and other liabilities
- Whether your loan is secured or unsecured
- Your lender’s minimum and maximum loan amount
- Your lender’s minimum and maximum loan term
Yes – you can generally refinance your fixed rate loan to another one with the same lender or a new provider. However, because some fixed rate loans come with early repayment fees, you should determine whether these outweigh the benefit of refinancing, which may be done to access a better rate, shorten your term or for a range of other reasons.
Some lenders offer fixed rate personal loan terms of between one and five years, but there are many that offer up to seven years. It’s important you choose your loan term carefully. Make it too short and you may not be able to meet your repayments. Make it too long and you will end up paying more in interest.
When you apply for a personal loan with Savvy, you can receive an outcome as soon as 60 seconds after you submit your fast application. From there, you can receive formal approval and funding as soon as within 24 hours.
