A fixed rate on a personal loan means, as you might expect, the rate is locked in from the beginning of your loan term and remains the same throughout your repayments.
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.
Why apply for a personal loan with Savvy?
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 means that if rates go down, you stand to save, but if they go up, you’ll pay more.
Budgeting
One of the primary benefits of a fixed rate is its accuracy when it comes to budgeting, as mentioned, so the opposite can be true for variable rates. If rates are particularly unsettled when you take out your loan, you could find your repayments going up or down every month.
Repayment flexibility
While there’s a chance you may be charged for additional or early repayments on a fixed loan, you won’t be with a variable rate. These 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.
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: 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.
- How much you borrow: larger loan sums will cost more, as interest is calculated based on a percentage of your loan balance.
- How long you take to repay: the shorter your term, 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 interest.
Fixed interest loan costs are easy to calculate, as you don’t need to worry about rates changing during the term. 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. | 12.00% p.a. |
|---|---|---|---|---|
|
$10,000
|
$2,023
|
$2,310
|
$2,749
|
$3,347
|
|
$20,000
|
$4,046
|
$4,620
|
$5,497
|
$6,694
|
|
$30,000
|
$6,069
|
$6,930
|
$8,245
|
$10,041
|
|
$50,000
|
$10,114
|
$11,550
|
$13,742
|
$16,734
|
Calculations based on a loan repaid monthly over five years.
How should I compare fixed rate personal loans?
There’s a variety of factors that should be considered when comparing the best fixed rate personal loan options for your needs, including:
- Interest rate: this is the big one to think about when comparing loan deals. 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 (as you can see in the above table).
- Loan amount: of course, you’ll need to ensure that you can actually borrow the amount you’re looking for. For instance, if you’re looking for a $60,000 personal loan, there’s no use entertaining offers from lenders who cap their loans at $50,000.
- Loan terms: similarly, you should always stick to lenders who can accommodate your preferred repayment term. 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 charges compared to other types of finance, it’s still important to consider establishment and ongoing fees. You can get an idea of how much your loan’s fees will cost by checking its comparison rate.
- Repayment flexibility: many lenders will allow you to make additional repayments and pay off your debt ahead of schedule free of charge, which can save you plenty of money. However, this won’t always be the case, which is why it’s important to compare.
- Eligibility: one of the most important things to be sure of before submitting your application is whether you’re eligible for the deal. Although different lenders have different requirements, we’ve laid out the general criteria a bit further down.
Fortunately, when it comes to comparing loans, it’s never been easier than doing it with Savvy. We’ll help you along every step of the journey, from comparison to application to settlement, to maximise your chances of approval for the right loan deal.
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?
Pros
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Better for budgeting
Because your rate is set in stone, you’ll know exactly how much is going towards your loan payments each week, fortnight or month.
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Protection against rate increases
If you’re taking out your loan at a time when rates are rising, you won’t have to worry about your loan increasing in cost.
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Wide range of options available
When comparing personal loan offers, you’ll find a wide and diverse variety of options to choose from.
Cons
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Less flexibility
As mentioned, some lenders will charge early repayment fees on fixed rate personal loans, which could block you from saving more money.
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No benefit from rate drops
While you’re protected if rates go up, you won’t be able to take advantage of any decreases in interest.
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May be higher if rates are expected to rise
If you’re borrowing at a time when interest is expected to rise, you may have to pay more to fix your rate.
The differences between fixed and variable interest rates
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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.
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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.
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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.
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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.
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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.
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.
Your estimated repayments
$98.62
| Total interest paid: | Total amount to pay: |
| $1233.43 | $5,143.99 |
Apply for your personal loan online
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Complete our simple online application form
First and foremost, you’ll need to fill out our quick and easy online form. Tell us about yourself, your finances, the loan you’re after and why you need it in just a few minutes.
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Compare your options with Savvy
Once you’ve done this, you’ll be able to assess the products on offer from our partnered lenders. A member of our team will reach out to help you choose the best available offer.
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Send your documents and formally apply
If you’re happy with one of the options available, you can go ahead and formally apply. We’ll handle this for you; simply send the required documents through our online portal and we’ll do the rest.
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Get approved and sign your contract
We’ll let you know when you’re formally approved, which can happen in a matter of hours, and all you’ll need to do is sign your loan contract electronically to receive your funds as soon as the same day.
Personal loan eligibility and documentation
Eligibility
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Age
You must be at least 18 years of age
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Residency
You must be an Australian citizen or permanent resident (or, in some cases, an eligible visa holder)
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Income
You must be earning a stable income that meets your lender’s minimum threshold (this can start from as little as $20,000 per year)
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Employment
You must be employed on a permanent, casual or self-employed basis
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Credit score
You must meet your lender’s minimum requirements related to your credit score and not be bankrupt or under a Part IX debt agreement
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Contact
You must have an active phone number, email address and online bank account in your name
Documents
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Personal information
Your full name, date of birth, address and contact details
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Photo ID
Such as a driver's licence or passport
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Payslips
Your last two consecutive payslips (or your last tax return if you're self-employed)
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Assets and liabilities
Information about any assets you own (such as a car or house) and liabilities in your name (such as other loans)
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Bank statements
90 days of bank statements may be requested, but not always
