Written by Unsecured personal loans are, as you might expect, personal loans that come without the need for security. This means that you won’t have to use a valuable asset, such as your car, as collateral for your loan (which can then be repossessed if you fail to repay it).
These loans are usually available from as little as $5,001 up to a maximum of $75,000 in some cases, with repayment terms spanning one to seven years (depending on your lender and the amount you choose to borrow). You can also choose to repay them each week, fortnight or month. Get a quote with Savvy today and experience the difference with our simple online application!
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How much do unsecured loans cost?
The cost of your personal loan will come down to several key factors. These are:
- Interest rate: this is perhaps the most important cost factor. The higher your interest rate, the more you’ll pay for your loan.
- Fees: establishment, ongoing and early repayment fees can all have a say in the overall cost of your loan.
- Loan amount: because interest is calculated based on your balance, larger debts will attract more interest.
- Loan term: the longer your term, the more interest you’ll pay, as your loan balance will decrease at a slower rate than shorter terms
- Additional repayments: paying off your loan early will lower the interest you’re charged and reduce the monthly fees you have to pay (as long as you aren’t charged an early repayment fee).
- Your credit score: your score and file will play a major role in setting your interest rate and fees, with lower scores leading to higher rates.
How should I compare unsecured personal loans?
Comparing your loan options before you apply is crucial when it comes to locking in the best available loan deal. There’s a wide range of variables to consider, including the following:
Interest rate
One of the most important areas to consider is interest, which also happens to be one of the easiest. All rates are prominently displayed by lenders, although these are only the minimum available (so the rate on your lender’s site may not be what you’re offered).
As you can see in the table section above, even rate changes as small as 1.00% p.a. could result in a difference worth hundreds of dollars, even over $1,000. A member of our team will help you compare offers among our panel of lenders to determine which is the best deal for your needs.
Interest rate type
What’s also worth thinking about, though, is the type of interest charged on your loan. There are two options here:
- Fixed interest: this is the most common with personal loans and works by locking your rate at the beginning of the loan. Fixed interest protects you from potential rate rises and provides you with a more consistent set of repayments which enable more accurate budgeting.
- Variable interest: this doesn’t lock in your rate, instead leaving it open across the loan. Variable interest is ideal for when rates fall during your term, potentially saving you money across your term, but they could end up costing you more in equal measure if they increase.
Fees
We mentioned a few of the fees that can be charged earlier, but these can include:
- Establishment fees: a one-off fee that’s built into your loan repayments, some lenders may charge this from around $150 up to as much as $600. However, others won’t charge it at all.
- Ongoing service fees: these are charged on an ongoing basis, usually each month. While some lenders may not charge these fees, others may add $5 to $10 to each month’s payment.
- Early repayment fees: these often aren’t charged for personal loans. However, for lenders who do charge them, the amount you’ll pay will depend on the size of the loan and the term remaining.
- Late repayment fees: you’ll be hit with one of these if you make a late payment, with charges ranging from $15 to $35.
Loan terms
As mentioned, loans can range from one to seven years, but not all lenders offer the full range. Some cap their terms at five years, while others may enforce a minimum of two to three years. If you’re looking for an especially long or short loan, it’s important to consider what your lender can offer.
Loan amounts
Of course, you’ll also have to make sure the lenders you’re considering actually offer the amount you need. It’s common for financiers to offer loans up to a maximum of $50,000 instead of $75,000, while some may enforce a minimum of $10,000 instead of $5,001.
Repayment flexibility
Unsecured loans will generally come with free additional repayments, affording you the flexibility to pay off your debt ahead of schedule and save money in the process. Additionally, certain lenders may also offer redraw facilities on their personal loans, which allow you to withdraw additional payments you’ve made previously at any time.
Eligibility criteria
It’s also important to know ahead of time whether you meet the eligibility criteria to qualify for a personal loan. We’ve unpacked the standard criteria below so you can find out what the requirements are from most lenders.
How will I be able to use my unsecured personal loan?
There are many potential uses for an unsecured personal loan. Because of their lack of attached collateral and the flexibility of personal finance in itself, you can essentially use your loan for whatever purpose you like. This is within reason, of course, with some lenders providing a list of suitable uses for funds under their loan agreements. Some of the most common reasons people take out a loan include:
- To consolidate outstanding debts (particularly those with high interest rates) and turn them into one manageable payment each month
- To fund renovations or other improvements around your home, ranging from low-key landscaping to redoing your kitchen
- To cover the cost of sudden medical expenses if you find yourself short on the funds you need to pay them upfront
- To allow you to organise your dream wedding rather than settle for something you’re not as happy with
- To pay for your family’s next holiday and treat them to an enjoyable travel experience
- To purchase a car which you may not be able to buy with a standard car loan (typically due to its age or condition)
- To help you buy expensive jewellery, such as the right engagement ring for your partner
- To ease the financial burden of ongoing bills, school fees and any other regular expenses around the home which put a strain on your finances
What’s the difference between secured and unsecured personal loans?
Unsecured personal loans aren’t the only option borrowers have when it comes to seeking out financing, though, as you can also choose a secured loan. There are several key differences between the two:
- Secured loans require a valuable asset, such as a car, to be used as collateral for the loan. This means that if, in the worst-case scenario, you become unable to pay off your loan, your car can be repossessed to cover lost funds.
- Because of this added security, interest rates and fees are typically lower than on unsecured loans.
- Borrowing power may also increase to as much as $100,000 with an unsecured loan.
- Because lenders need to assess the suitability of the security and the steps involved in this process, these loans generally take longer to process than unsecured loans.
- There will also be requirements in place for your security, so if your car’s age or condition doesn’t satisfy your lender’s criteria, you won’t be able to use it as collateral.
- Fewer lenders offer secured personal loans compared to unsecured loans.
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
The factors impacting your borrowing power
Frequently asked unsecured personal loan questions
In many cases, getting a personal loan is simple thanks to its flexible lending criteria and online accessibility. However, it may be harder if you’ve struggled with your credit in the past or earn a low income.
When you apply with Savvy, we’ll compare offers from our panel of lenders and match you with the best one available to you based on your profile (as long as you meet the criteria of at least one lender).
Yes – self-employed workers can use their tax return in place of payslips in the application process to qualify for a regular unsecured personal loan. If you’re unable to supply your tax return, there are other verification sources you can use, such as a signed letter from your accountant.
There are still options available for borrowers who’ve struggled with their credit in the past through specialist lenders. These loans will generally come with higher rates and fees, as well as lower maximum loan amounts, but offer a handy solution if you need $5,001 or more and have been turned away by the banks.
It can – having more than one borrower on a personal loan means there are two incomes to be relied upon instead of one. The combined income of you and your partner may enable you to borrow more than you otherwise would on your own.
Yes – however, you might be better off accessing an unsecured business loan instead. These can provide business owners with access to funds of up to $300,000 without needing to provide any security. Additionally, they can be repaid over terms as little as three months up to five years.
These loans are more restrictive than personal loans in that you’re required to use the funds for business purposes only. However, you can get approved just as quickly for far greater sums, which makes them appealing for borrowers.
Whether your credit is negatively affected will come down to how you manage your debt. Applying for unsecured personal loans may hurt your credit score if you make too many applications in a short period, late repayments or default on the loan. However, making consistent and timely repayments and paying off your loan in full can boost your score.
