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A personal loan allows you to pay for life’s large expenses, such as a car, home renovations or perhaps even a much-needed holiday.
They usually come with lower interest rates than your credit card, and can be a good way to bridge a gap in your finances. A personal loan for a car, for example, is probably going to cost you less over the long term than finance at the car dealership.
Let’s take a closer look at which banks offer personal loans.
Related: Our Pick of the Best Personal Loans
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Banks Offering Personal Loans
The Big Four banks all offer a range of personal loans. The interest rate and fees will vary and most only provide a range of interest rates on their website.
NAB for example says their comparison rate on a variable rate personal loan is between 9.54% to 21.49% p.a. while CBA says their comparison rate on a variable rate personal loan is between 9.53% p.a. to 21.39% p.a. CBA also says that their representative comparison rate is 16.94%.
“At least half of our customers will receive the representative rate or lower,” CBA says in its fine print.
Remember a comparison rate is a much better indicator as it calculates the actual cost of a loan including additional fees and charges.
Westpac also offers a range of rates but is more specific around rates for different purposes. For example, it offers a fixed 7.2% per annum comparison rate for an electric/hybrid car secured loan but its comparison fixed rate range for non-electric/hybrid secured car loans is 7.69% p.a. to 14.14% p.a. Westpac also has a calculator that can estimate your interest rate based on your circumstances. To do this it needs to retrieve your credit score (but it also adds that just estimating the rate via the calculator won’t affect your credit score) so needs some personal details from you to estimate this.
ANZ has a comparison rate on its variable personal loans of between 8.18% p.a. to 20.58% p.a.
A secured loan is a loan that uses collateral, like the car you are buying with it, as a guarantee against the amount you are borrowing. If you cannot repay the loan, the lender can take the asset. An unsecured loan does not have collateral but may have a higher interest rate and require a higher credit rating from you. Lenders may also lend a smaller amount on an unsecured loan.
The limit on most personal loans is around $50,000 to $100,000 but this will also depend on your circumstances and credit score. The terms are usually between one and seven years.
Most small banks and credit unions also offer personal loans, sometimes at more competitive rates. Heritage Bank, for example, offers a secured car loan for new or used vehicles less than five years old with a comparison rate of 6.49% for approved applicants and a fixed personal loan with a comparison rate of 9.35%.
Great Southern Bank (formerly CUA) offers a comparison rate of 8.31% pa to 20.35% per annum on an unsecured fixed personal loan and Bendigo Bank offers a rate of 8.51% p.a. on a secured fixed personal loan. Bendigo also offers a fixed rate of 5.84% p.a. on secured loans for green vehicles.
However, not all banks offer personal loans: Suncorp has stopped offering new personal loans, for example, as more non-bank lenders enter the personal loan market.
Pros and Cons of Using Banks for Personal Loans
Pros
- Banks, especially the big four, have bigger capital reserves behind them and can offer more security and stability than some neo lenders. One of Australia’s first neobanks, Volt Bank, closed when it wasn’t able to secure enough capital to offer mortgages, highlighting the difficulties some non-traditional lenders can face.
- You may also have an existing relationship with a bank which could simplify the application process and give you some negotiating ability on the rate.
- Banks may be more likely to have different types of loans that cater to your specific needs.
Cons
- If you don’t have a good credit rating, you may end up with a higher interest rate, making a personal loan with a bank an expensive way to make ends meet.
- Interest rates and fees may be much higher than some digital lenders. The Big Four banks usually trade on their well-known names and are not known for offering the most competitive rates for most products.
Alternatives To Using Banks for Personal Loans
There are a number of digital lenders, such as NOW Finance, OMM, SocietyOne, MoneyMe and Plenti which specialise in personal loans.
The interest rates offered by digital lenders will also be determined by your credit rating but many of their starting comparison rates are lower than the banks. Plenti’s comparison rate for a secured car loan starts at 7.82% while NOW Finance says its comparison rate starts at 6.75% for both secured and unsecured loans without fees. Harmoney meanwhile offers fixed rates starting at 5.66% for personal loans.
Just like bank lenders, digital lenders have calculators where you can work out the interest rate you will be charged so there are no nasty surprises.
You can also use your credit card if your limit is high enough but the interest rate is likely to be higher than personal loan rates—sometimes above 20%. If you do decide to rely on your credit card don’t forget to check your statement where it highlights how long it will take to pay back your loan if you only pay back the minimum each month as a sobering reminder of the true costs involved.
Be wary of payday loans, too, as they charge much higher fees and interest rates. Nimble, for example, charges an establishment fee of 20% of the principal loan amount for amounts between $300 to $2000 plus 4% of the principal per month. Its fixed rate for amounts between $2,050 to $10,000 is 47.6158% pa. CashConverters offers very similar rates. These kinds of loans are designed to be paid back as quickly as possible—hence the name payday loans—or the cost can become astronomical.
Frequently Asked Questions (FAQs)
What is the best bank for a personal loan?
This will depend on a lot of factors but many of the smaller banks and digital lenders offer more competitive rates. See our picks of the best providers here.
How much would a $5000 personal loan cost a month?
This will be based on your credit score and the interest rate you’re paying (as well as any fees), but as an example: a $5,000 loan, with a five-year term and a comparison rate of 11.65% calculated on ANZ’s personal loan calculator for someone with a credit score between 880 to 969 will be $121.95 a month. That means the loan will incur a total cost of $7,317.
Which bank easily gives a loan?
Many digital lenders, such as Plenti and NOW Finance, say funds can be approved in as little as 24 hours, but it’s important to make sure you can repay the principal as well as the interest. You can read more in our guide to the easiest personal loans to get.
[1] Based on a $5000 loan, with a five-year term and a comparison rate of 11.65% calculated on ANZ’s personal loan calculator for someone with a credit score between 880 to 969.
