Interest rates rarely stay still for long. The Reserve Bank of Australia (RBA) regularly adjusts the cash rate in response to economic conditions, and lenders often follow suit by changing the rates on their loan products.
A variable rate personal loan is built around that reality, bringing some welcome flexibility to borrowers around the country. So, is a variable interest rate right for your personal loan?
Variable personal loan interest rates
Rates correct as of August 2026.
What is a variable rate personal loan?
A variable rate personal loan is a type of personal loan where the interest rate isn't fixed for the life of the loan. Instead, it can move up or down over your loan term, which means your repayments can change too.
If your rate drops, you'll pay less each month, or you can keep your repayments the same and pay off your loan faster. If it rises, your repayments will increase to keep your loan on track to be repaid within your original term.
Beyond the rate itself, it works the same way as any other personal loan. You can typically borrow anywhere from $5,000 up to $75,000, with terms ranging from one to seven years, and use the funds for almost any personal purpose.
Fixed vs variable rate personal loans
By contrast, fixed rate personal loans do have their rate locked in at the start and remain constant until the end of the term. Here are the key differences when it comes to fixed and variable rates:
| Fixed rate | Variable rate | |
|---|---|---|
| Interest rate | Locked in for the life of the loan | Can rise or fall over your loan term |
| Repayments | Stay the same each month | Can change if your rate moves |
| Budgeting | Easier, since repayments are predictable | Trickier, since repayments aren't guaranteed to stay the same |
| Additional repayments | May come with fees or limits, depending on your lender | Usually free, with no cap on how much extra you can pay |
| Redraw facility | Less commonly offered, and may come with a fee | More commonly offered, often free of charge |
| Early payout | May come with a break fee | Usually free to pay out early |
How much will my variable rate personal loan cost?
There’s a range of variables that impact the cost of a loan, including the following:
- Your interest rate
- Your loan amount
- Your loan term
- Your loan fees
- How often you repay it (and whether you make additional repayments)
However, it’s important to see what things might cost in practice. Let’s compare two different $20,000, five-year loans: one with a variable rate and one with a fixed rate. For the sake of calculations, we’ll say that the variable rate changes every 12 months (though it’s unlikely to happen like this in real life):
| Variable rate | Fixed rate | |
|---|---|---|
| Year one rate | 7.50% p.a. | 7.50% p.a. |
| Year two rate | 7.15% p.a. | 7.50% p.a. |
| Year three rate | 7.00% p.a. | 7.50% p.a. |
| Year four rate | 7.05% p.a. | 7.50% p.a. |
| Year five rate | 7.65% p.a. | 7.50% p.a. |
| Total interest paid | $3,984 | $4,046 |
| Calculations based on a $20,000 loan repaid monthly over five years, assuming the rate change applies at the start of each new year. This is a simplified example; in reality, rates can change more frequently and unpredictably than shown here. | ||
In this example, even with the rate creeping back up in the final year, the borrower still ends up paying $62 less in total interest than if the rate had stayed fixed the whole way through. It's a reminder that variable rates can work in your favour just as easily as they can work against you.
Case study: paying more than the minimum
Jeremy takes out a $25,000 variable rate personal loan over five years to renovate his bathroom, locking in a rate of 8.50% p.a. His minimum monthly repayment comes to $513, but Jeremy wants to see how much he could save by paying a bit more each month.
He decides to add an extra $50 to every repayment, bringing his monthly payment to $563.
| Loan amount | Loan term | Interest rate | Extra repayment | Monthly repayment | Total interest | Overall loan term |
|---|---|---|---|---|---|---|
| $25,000 | 5 years | 8.50% p.a. | $0 | $513 | $5,775 | 5 years |
| $25,000 | 5 years | 8.50% p.a. | $50 | $563 | $5,125 | 4 years, 6 months |
| Calculations based on a $25,000 loan at a fixed rate of 8.50% p.a. for comparison purposes. Actual variable rates can move during your loan term, which would affect these figures. | ||||||
By paying just $50 more each month, Jeremy pays his loan off six months sooner and saves $650 in interest, all without being charged a cent extra by his lender for doing so. Since his loan doesn't come with any fees for making additional repayments, the extra $50 goes straight toward paying down his balance.
Variable rate personal loan pros and cons
Pros
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Potential to save if rates fall
Since your rate isn't locked in, you'll benefit directly if your lender lowers rates during your loan term, without needing to refinance or renegotiate.
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Greater repayment flexibility
Variable rate loans typically let you make extra repayments and pay out your loan early without being charged for it, which can help you save on interest and clear your debt sooner.
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Access to a redraw facility
Some loans offer a redraw facility, giving you the option to access extra repayments you've made if you need the funds back.
Cons
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Repayments may go up
If rates rise during your term, your repayments will increase too, which can make longer-term budgeting less predictable.
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Harder to budget around
Without a fixed repayment amount, it can be trickier to plan your finances with complete certainty over the life of your loan.
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Rate movements are outside your control
Your lender decides whether and when to change your rate, so you have no say over how your repayments might shift during your term.
How to apply for a variable rate personal loan
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Submit your online application
Fill out our form with details about yourself and your finances.
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Send required documentation
We’ll need to verify your current money situation and your identity.
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Have a chat to your Savvy broker
Your broker will give you a call to discuss your options.
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Apply for your personal loan
Once you give us the all-clear, we’ll prep your application and send it to your lender.
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Get approved and settled
After you’re approved, we’ll handle settlement and your loan funds will be sent to your account!
Why apply for a personal loan with Savvy?
Personal loan eligibility and documentation
Eligibility
- You must be at least 18 years of age
- You must be an Australian citizen, permanent resident or eligible visa holder
- You must be employed and earning a consistent income from one or more eligible sources (this can start from as little as $480 per week)
- You must meet your lender’s requirements relating to credit score
Documentation
- Photo ID, such as your driver's licence
- Your last two consecutive payslips
- Details about any assets or liabilities in your name
- 90 days of bank statements may be requested in some situations
Top tips for saving on a variable rate personal loan
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Compare your options before applying
Rates and features vary significantly between lenders, so comparing multiple options gives you the best chance of finding a competitive rate. When you apply through Savvy, your broker will do this for you.
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Make extra repayments where you can
Since most variable rate loans don't charge for additional repayments, paying more than the minimum whenever you're able can meaningfully cut your total interest.
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Choose the shortest term you can comfortably afford
A shorter term means higher monthly repayments, but significantly less interest paid over the life of your loan.
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Consider refinancing if rates drop
If your lender doesn't pass on a rate cut, or a better deal becomes available elsewhere, refinancing to a more competitive variable rate loan could save you money.
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Avoid applying for multiple loans at once
Each application can appear on your credit file, and several applications in a short period can make lenders view you as a higher risk.
Is a variable rate personal loan right for me?
Whether a variable rate suits you comes down to how comfortable you are with some uncertainty in your repayments, in exchange for greater flexibility elsewhere. A few questions worth asking yourself are:
- How important is repayment flexibility to you? If you want the freedom to make extra repayments, pay out your loan early or access a redraw facility without being charged for it, a variable rate will usually offer you the flexibility to do so.
- Could you manage if your repayments increased? Since your rate isn't locked in, it's worth considering whether your budget could absorb higher repayments if rates rise during your term, not just whether it suits you at today's rate.
- How do you feel about budgeting with some uncertainty? A variable rate won't give you the same month-to-month certainty as a fixed rate. If predictable repayments matter more to you than potential savings, a fixed rate loan may suit you better.
- Do you expect rates to fall, rise, or stay steady? No one can predict this with certainty, but if you believe rates are more likely to fall than rise over your loan term, a variable rate gives you the chance to benefit directly.
If flexibility and the potential to save matter more to you than complete repayment certainty, a variable rate personal loan is likely a good fit. If you'd rather know exactly what you're paying each month regardless of what the market does, a fixed rate personal loan may be worth considering instead.
