Choosing the right personal loan is a significant decision that requires balancing flexibility, affordability and long-term impact. The good news is that there are many options available, from banks to online lenders, each offering different features. Here’s how to make the right choice for your needs.
1. Start with a clear goal
The first step in choosing a personal loan in Australia is identifying exactly what you need the funds for. Some of the most common reasons people apply for personal loans include:
- Debt consolidation
- Home renovation
- Medical or dental procedures
- Education or professional development
- Travel or major life events
2. Check your credit score
Your credit score plays a key role in determining your eligibility and the rate you’ll be offered. In general, the higher your score, the lower your interest rate. Lenders use this as an indicator of risk, and it can make a significant difference in how much you pay over the life of the loan.
If you’re unsure what a good credit score looks like or want tips on improving yours, read this guide to understanding a good credit score.
3. Compare traditional and online lenders
When searching for the best personal loan, don’t limit your comparison to traditional banks. While banks may be a familiar option, they can be slower to process applications and often apply more rigid lending criteria.
Online and non-bank lenders tend to offer faster approvals and more competitive rates. They also give borrowers the convenience of applying fully online, which can save time and reduce paperwork. You can also learn about how lenders structure their products by reviewing the differences between secured and unsecured personal loans.
4. Choose between fixed and variable rates
With a fixed-rate personal loan, your repayments stay the same for the entire loan term. This can make budgeting easier and give you peace of mind.
Variable-rate loans may start lower, but the interest rate can change over time. While this could mean potential savings, it also introduces uncertainty into your repayment plan.
5. Use repayment tools to plan ahead
Estimating your loan repayments in advance helps you understand how different loan amounts and terms will fit into your budget. Try this personal loan repayment calculator to explore a range of options and see how changes in interest rate or loan size could affect your weekly or monthly payments.
6. Choose a loan term that fits your budget
Loan terms typically range from one year to seven years. A shorter term means higher repayments, but you’ll pay less interest overall. A longer term reduces the amount you pay each month but increases the total cost of the loan.
7. Get rate estimates without affecting your credit score
One of the most useful tools when comparing personal loans is the ability to get a personalised quote that doesn’t impact your credit score. This type of soft check allows you to shop around safely before committing.
You can get started by using this personal loan eligibility calculator to see what kind of rate you may qualify for.
8. Read reviews and check lender’s reputation
Real customer feedback can give insight into what it’s actually like to borrow from a lender. Look for independent reviews that mention communication, customer service and ease of application.
Awards can also offer a useful benchmark. For example, the Mozo Experts Choice Awards evaluate Australian lenders on criteria like cost, transparency and customer satisfaction across hundreds of products.
9. Watch out for red flags
As you compare options, be mindful of warning signs that might indicate a poor borrower experience. These include:
- Vague or unclear loan terms
- Hidden fees or charges not disclosed upfront
- Delays in approval or communication
- Negative customer reviews about the service or repayments
Before applying, check the lender’s FAQs to ensure everything is clearly explained.
Choosing a personal loan
Finding the best personal loan means choosing one that aligns with your financial goals, offers clear and flexible terms and comes from a trusted lender.
If you’re ready to take the next step, NOW Finance offers fixed-rate, no-fee personal loans in Australia tailored to your needs. Learn more about how it works and use our tools to get a quote that won’t affect your credit score.
Disclaimer: This article contains factual information only and does not constitute financial advice, a recommendation, or an offer of any kind. It has been prepared without considering your personal objectives, financial situation, or needs. Before taking any action, you should assess whether the information provided is appropriate for your circumstances. If this article discusses the acquisition or potential acquisition of a specific credit product, you should obtain and review the relevant disclosure documents before applying. The information is believed to be accurate as at the date of publication; however, changes in circumstances after this date may affect its accuracy.
