When shopping around for a personal loan, consumers will often look at the interest rate as a means of determining how competitive a loan is. The representative interest rate will also allow the lender to provide an example of how much a borrower will pay back overall during the course of the personal loan.

Understanding Personal Loans

A personal loan is finance given to an individual by a lender for personal expenditure. People are usually free to use their personal loan for whatever purpose they wish, although the lender may ask the purpose for the loan in order to decide whether the level of borrowing being applied for is really needed.

Some lenders, including ourselves at NOW FINANCE, may also offer specific loan products based on the reason for needing the personal loan.

What are Interest Rates?

An interest rate is the rate of interest that is payable on a sum of borrowed money. Interest is calculated based on an annual rate, and will be charged on the outstanding value of the principal amount of the loan. The interest is effectively the amount you’re paying for the loan, which you may see quoted by lenders as the cost of borrowing.

How is My Interest Rate Calculated?

A number of variables will determine your interest rate and actual comparison rate.

These include:

  • The current base interest rate set by the Reserve Bank of Australia.
  • The amount of money you are looking to borrow.
  • The time you wish to borrow the money for.
  • Risk factors determined by carrying out a credit check.

When you receive a personal loan quote from a lender, the interest will be included in the repayments based on the loan period you specify.

Understanding Interest Rates vs. Actual Comparison Rates

Within our personal loan calculator, you will see both the interest rate and the actual comparison rate quoted within the calculation.

The comparison rate is a figure designed to encompass the total cost to you for the loan, including all of the interests, fees and charges which you will be required to pay.

The actual comparison rate allows us to demonstrate to you what the true cost of the loan will be. This also helps us to be transparent towards our customers while also easily allowing you to compare the cost of a loan from NOW FINANCE against that of other borrowers.

An example calculation is below.

If you were accepted for a $10,000 personal loan from NOW FINANCE, repayable over 60 months with weekly repayments, it would work out as follows:


Fixed Interest Rates and Variable Interest Rates

While NOW FINANCE offers only fixed interest rate personal loans, variable interest rate personal loans are also available from other lenders.

Read our blog on the difference between fixed rate and variable rate loans.

We have summarised the differences in the table below.


Fixed Rate Loans

Variable Rate Loans

Interest Rate

Your interest rate is fixed to that quoted when you accepted your loan. Your interest rate may vary periodically in line with market rates.


Your repayment amount will remain the same throughout your loan period. Your repayment amount will differ in line with changes in the interest rate.


Consistency of repayments means you’re always certain of what you’ll pay and when, enabling you to budget easily. May offer a lower overall interest rate in the long-term.
    If interest rates remain low then the overall repayment amount may be lower.


Fixed interest rates may be higher than variable rates in the long-term. Unpredictability of interest rate means it can be hard to plan and budget personal finances effectively.
  A fixed interest rate loan may lead to repaying more than you would with a variable rate loan. Potential for interest rate to increase and remain high (although these will often be capped for variable rate loans).


Choosing Your Personal Loan

When choosing your personal loan, ensure you take the time to compare interest rates carefully and consider the different options that are available. Ensure you compare using the actual comparison rate to get a true picture of what your loan will cost.

To get started with your loan application you can contact us now to speak with an expert, who will also answer any questions you may have relating to your interest rate or other factors.


Disclaimer:  This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs.  Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.

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