A personal loan is a lump sum you borrow for personal use and repay in regular instalments over a fixed term, typically one to seven years. Common uses include debt consolidation, car purchases, home improvements, solar and batteries, weddings, travel and medical costs.
Secured vs Unsecured
- Secured personal loan: backed by an asset, usually a car. Because the lender can take the asset if you default, rates are generally lower.
- Unsecured personal loan: no asset attached. The lender relies on your income and credit history, so rates are generally higher.
Fixed vs Variable Rate
- Fixed rate: your repayment stays the same for the whole term. Extra repayments or early payout may attract fees.
- Variable rate: the rate can move, but these loans usually allow extra repayments and early payout with fewer or no fees.
How Lenders Price a Personal Loan
Most lenders now use risk-based pricing. Two people applying for the same loan can receive very different rates depending on:
- Credit score and credit history
- Income stability and employment type
- Existing debts
- Loan purpose (some purposes, such as green upgrades, attract discounted rates)
- Whether the loan is secured
Because the rate is set after your application, compare comparison rates and ask for a rate estimate that does not affect your credit score.
Fees to Watch
- Establishment fee
- Monthly account-keeping fee
- Early repayment or break fees (mainly on fixed-rate loans)
- Late payment fees
The comparison rate rolls the main fees into a single percentage, which makes it the fairest way to compare offers.
Next Steps
Compare options on the personal loans page or estimate repayments with the personal loan calculator.