Your Complete Guide To Personal Loans

Discover the ultimate guide to personal loans in Australia, compare loan types and see which option is best for you.

12 min Read

Updated on

Feb 20, 2021

Sometimes, you need a helping hand to get you to the next stage of your life. Whether you’re buying a new car, remortgaging your home or taking that first step on the property ladder, a personal loan can help you get there faster. But which loan is right for you? Is taking out a loan the right course of action? Discover our complete guide to personal loans in Australia, compare loan types and see which option is best for your needs today.

What Is a personal loan?

Key Factors to Consider

Personal Loan Types

Secured vs. Unsecured Loans

Benefits & Drawbacks

Documents Needed

Common rejection reasons

Tips for approval

What is a personal loan?

A personal loan is a lump sum payment of between $2,000 to $100,000 that is repaid over a term of up to seven years. The loan amount and repayment options are then agreed upon by you and the lender. A personal loan can be secured or unsecured, and used for a variety of purposes, from buying a new car to buying your first home.

Key Factors to Consider before Applying

Before you take out a personal loan it’s important to consider your reasons for needing the loan. Perhaps you are making renovations to your current home, buying a new home or consolidating your debts to manage your monthly outgoings.

How much are you looking to borrow?

If you’re looking to borrow a smaller amount under $2,000 you might want to consider an overdraft or a short term loan rather than a personal loan.

Do you have a bad credit rating?

When applying for a loan your lender will perform a credit check on you before taking your application further. A bad credit score can mean high risk, which can mean higher interest on your loan, so if you know you have a bad credit score you may be better off looking at loans from short term lenders. Use our Repayment Calculator to get a better idea of your rate in seconds!

Do you have any equity you can use as security?

Secured loans offer lower interest rates, as they are lower risk. If you have assets you can use as security you can benefit from a lower rate overall with a secured loan.

Do you need one lump sum, or will you need more funds during the loan term?

If you need to access funds more than once over a longer period you may want to choose a personal line of credit or overdraft.

What Personal Loan Types are Available?

Choosing the right type of personal loan for you can save you a lot of money on interest repayments in the long run. There are a few standard types of personal loans you can choose from, including:

Unsecured Loans

An unsecured personal loan is one where the lender requires no security on the debt. This means your loan is not backed by any personal collateral, such as home equity or a line of credit. Unsecured loan types offer a more flexible option for borrowers, however interest rates on these loan types are usually higher as they are more financially risky than a secured personal loan. You may also need to provide a guarantor to say that your repayments will be made, though this is not normally required.

Secured Loans

A secured loan is a personal loan that requires you to provide security on the loan amount. In this case, the person taking out the loan uses an asset they own as security, usually your home or car, or in some cases the asset you are purchasing with the loan. The lender then has the authority to repossess your assets in the event of missed payment to cover the cost of your debt. These loan types are more likely to have lower interest rates as they are less financially risky for lenders.

Variable Loans

A variable-rate personal loan is a flexible loan with varying monthly repayments. Interest rates can fluctuate at the lender’s discretion, which can cause your repayment amount to increase or decrease. If rates decrease, your repayment amount will decrease and vice versa. These loan types tend to be more likely to offer features and benefits which could suit your situation, however they can be harder to budget for on a month-to-month basis.

Fixed Loans

The opposite of variable loans, fixed loans charge a fixed interest rate for the full term of the loan, making it easier for you to manage your repayments. The only real downside to a fixed loan is if interest rates drop, you won’t see the benefit and may be paying more.

Overdraft

An overdraft is a type of emergency personal loan, where you are granted a specific amount of money to go “overdrawn” on your account balance. These are simple to set up and a convenient way to cover any financial emergencies or expected payments leaving your account. You only pay interest on what you use throughout the month, however, there are usually caps on how much you can borrow, and interest rates are usually higher than a personal loan.

Line of Credit

A line of credit a pre-agreed borrowing limit that can be used at any time, offering flexible access to funds as and when you need them. These kinds of loans work similarly to a credit card and are good for making multiple smaller purchases that can be repaid quickly.

“A fixed rate loan is a good option in terms of stability, you will find it easier to budget as you know exactly how much you are paying for your loan each month.”

SocietyOne CEO Mark Jones

Secured vs. Unsecured Loans

There are 3 primary points of difference between these two personal loan types:

Secured

Unsecured

Asset Requirement

Backed by an asset you own, such as your home or car

Require no security to set up

Variances in Interest Rate

Lower interest rates

Higher interest rates

Restrictions on Loan Usage

Some restrictions

Little to no restrictions

Benefits & Drawbacks of Personal Loans

There are a number of advantages and disadvantage to taking out a personal loan, most of which will be relevant to your personal situation. Take some time to consider your reasons for taking out the loan and assess how the loan will benefit you in the long term. Check out the information below for some general personal loans pros and cons.

Advantages

Disadvantages

Consolidate existing debt

Purchase big-ticket items now and pay off the full amount in smaller instalments

You can borrow any amount up to $100,000

Longer repayment period

Transferring of debt rather than just paying off what you owe

Not meeting the monthly repayments will increase fees and interest

Did you know?

Personal loans offered by SocietyOne are free of hidden fees or monthly costs and also don’t penalise you for being proactive by not charging early repayment fees.

What Documents are Needed to Apply for a Loan?

In order to apply for a loan, there are some personal documents you will need to share with your lender. Most financial institutions will have their own application criteria, but in general, you will need the following documentation to finalise your loan application.

Proof of identification

This can come in the form of a driver’s licence, proof of age card, passport or Medicare card. You may also be asked to provide a utility bill showing your current address.

Proof of income

In order to verify your income, you may need to provide recent payslips, proof of bank statements and two years of tax returns if you’re self-employed.

Statements from other loan accounts/credit cards

Your lender will ask you to provide information on any other loans or credit cards you have open before you set up your personal loan.

If you’re applying for a car loan you will also need to provide:

• VIN or chassis number, engine number and registration plate details
• Car dealer information or the contact details of who sold you the car
• Tax invoice and receipt for the car or purchase price if a private sale
• Your CTP insurance and comprehensive insurance details

Common Reasons for Personal Loan Application Rejections

Getting rejected for a personal loan can be disheartening, especially when you’re in a tight spot and in need of the money. You can feel lost, and unsure of why they would reject you. There are a variety of reasons your loan application may get rejected, ranging from your employment history to the reason you need a loan in the first place.

Read on to discover the most common reasons personal loan applications are rejected to get an idea of your own eligibility and tips for getting your application approved.

Bad credit history

There are a number of factors that can give you a bad credit score, even if you have never defaulted on a loan payment before. Things like late payments and applying for lots of different loans over a short period of time can give you a bad credit rating. Have an idea of your rating before you apply by requesting a copy of your credit report or getting a credit score check.

Low income

Your lender is going to be looking at your application and thinking, “Does this person have the means to make the monthly repayments on this loan?”. Lenders cannot approve applications that can’t be paid back, so this will play a huge factor in the decision-making process.

Unstable employment history or non-existent employment history

In relation to the above, lenders will check your employment history, and whether your job is stable enough to keep up with monthly repayments.

Incorrect personal details

Lenders are looking to verify your details in order to grant you the loan, so any inconsistencies here will be flagged and they might reject you.

Credibility of loan purpose

Check you can finance what you need with the loan you are making an application for. Many loans come with restrictions on how the funds can be used, for example, secured loans can only be used on certain assets.

Low-value equity

Many lenders have restrictions on what assets you can use as equity against your loan, so if your assets don’t make the cut you could be rejected.

Amount of loans already open

If you already have several personal loans open the lender could reject you as high risk.

Tips for getting your application approved

Understand your eligibility

Make sure that you understand the requirements of the loan you are applying for.

Double-check your personal details

It seems simple, but ensure that the details you provide are correct so that there is no reason for your application to be rejected. Providing any incorrect information or submitting a part-filled out application can lead to rejection.

Check that your equity meets requirements

Ensure that your collateral meets the requirements of the loan you’re applying for.

Take a look at your loan portfolio

Don’t hold more loans than you can afford, as your lender might not think you’ll be able to pay it back. If you have other loans, you can look into consolidating this into one loan or paying back some of the loans before you apply for new ones.

Check the credit requirements

Understand what level of credit you will need for your loan application to be successful and see if you meet them. If you’re unsure, ask your lender before you apply.

Check your loan purpose is allowed

Discuss your loan purpose with your lender to see if it suits the loan you are applying for. Secured loans will have more restrictions.

Ensure you meet employment requirements

Check whether you need to have been in your job position for a certain amount of time, or how regularly you need to show income is coming in before you apply.

Find out the min. income requirements

Different lenders will have different income requirements, and this can change subject to the loan you are applying for.

“A great idea is to check your credit score and make sure you meet all of our eligibility requirements before applying. That way you may avoid being rejected.”

SocietyOne CEO Mark Jones

Frequently Asked Questions

Things to Consider Before Getting a Personal Loan

Eligibility criteria for personal loans

If you’re thinking of applying for a personal loan from SocietyOne, there are a few key criteria that you’ll need  to meet to be eligible:

You need to be at least 18 years of age
Be an Australian citizen or a permanent resident of Australia
You must earn more than $30,000 per annum, with Centrelink considered to be a supplementary form of income
It’s important that you have a good credit score

What will I need to get a personal loan?

You may need to supply us with the following  information and documents as part of your personal  loan application:

Your personal details – name, address, date of birth
A driver’s licence or passport
Proof of your address - for example, a utility bill
Proof of your income in the form of payslips or bank statements
Details about your day-to-day expenses, and any other debts

What is the process of applying for a personal loan?

Applying for a SocietyOne loan is simple.

‍Get your rate: In as little as 2 minutes we'll give you an interest rate and comparison rate based on your credit profile.‍
Apply online: Most people finish their application within 5 minutes (and it's easier to do if you're enjoying your morning coffee).‍
Get paid: Once approved, we'll have the loan funds in your account in as little as 1 business day.‍

Get your rate now and get started.

How much can I borrow, and for how long?

The amount you can borrow depends on the loan options you choose and your serviceability (this is a calculation of how much you can afford to repay)

With an unsecured personal loan, you can borrow from $5,000 to $50,000. However, if you choose our secured option, you can borrow up to $70,000.

With either option, you should borrow the amount that best suits your situation, making sure you will be comfortable paying off each instalment.

I've forgotten my password

Please contact customer service at customer.service@societyone.com.au.

What are the interest rates?

Fixed interest rate

Our personal loans have a fixed interest rate, meaning your interest rate doesn't change during the life of your loan and your regular repayments are always the same.

Fixed rate personal loans can help make it easier for you to budget. With no early repayment fees, our fixed rate loans give you more freedom and allow you to pay off your debt sooner.

Our fixed rates for unsecured personal loans start from 5.95% p.a*

Our fixed rates for secured personal loans start from 4.95% p.a* ‍

Comparison rate

If you’re looking to compare personal loans, the comparison rate is the most transparent way to compare the true costs. A comparison rate takes into account the interest rate as well as all of the fees and charges that are payable (such as establishment fees), making it easier to understand the complete cost of the personal loan with a more transparent comparison of the products.

If you’re looking to compare personal loans, the comparison rate is the most transparent way to compare the true costs. A comparison rate takes into account the interest rate as well as all the fees and charges that are payable (such as establishment fees), making it easier to understand the total cost of the personal loan with a more transparent comparison of the products.

Our comparison rates for unsecured personal loans start from 5.95% p.a*

Our comparison rates for secured personal loans start from 4.95% p.a*

Are there any fees?

We charge a one-off establishment fee that is included in your total loan amount. There are also no monthly fees or early repayment fees giving you the security of a fixed rate loan, with the flexibility to pay it off early. Visit our Rates & Fees page for further details.

‍

Establishment fee‍

No up-front payments, just a one-off fee included in your total loan amount and paid over the life of the loan. Establishment fees start from: 0% with a maximum establishment fee of $595.

‍

Late Repayment Fee

If your loan repayment is unable to be processed and the payment remains outstanding, a late fee will be payable at 5, 14, 21 & 30 days after the payment date. Late Repayment fee: $35 per late payment

‍

Direct Debit Dishonour Fee

‍It’s important to ensure there are enough funds in your account to cover each of your repayments to avoid dishonour fees. This fee is payable if we are unable to process a direct debit from your account.

Dishonour fee: $15 per dishonour

‍

Early repayment fee

‍Some lenders charge you for paying your loan out early. We don't!

Early repayment fee: $0

Are there any certain amounts or terms I should be aware of?

Loan amount limits‍

The minimum and maximum amounts you are able to borrow:

$5,000 to $50,000 for unsecured personal loans
$5,000 to $70,000 for secured personal loans

Loan terms‍

Your repayments are split over your loan term. A shorter loan term means less interest is paid over the life of the loan, while loans with longer terms will have lower regular repayments.

You can choose the loan term that suits you:

2 years, 3 years or 5 years for unsecured personal loans
2 years, 3 years, 5 years or 7 years for secured personal loans.

Is a credit check mandatory in order to apply for a personal loan?

Yes, we use this and assess your financial situation to calculate your interest rate & reward borrowers who have maintained good credit scores. Receiving a rate quote from us will not impact your credit score. We use what is called a 'soft call' to get your credit score from the credit bureau which allows us to calculate a personalised rate for you. However, once you have submitted your loan application, we will conduct a credit check as part of our assessment process. This check is known as a 'hard call' and will be reflected in your credit score.

Can I apply for a personal loan if I am currently unemployed?

To be eligible for any SocietyOne personal loan, you need to be employed and earning more than $30,000 per annum (Centrelink can be used to support this income).

What’s the difference between a secured personal loan & an unsecured personal loan?

Most personal loans come with two options, as a secured or unsecured loan. But which option is best for you?

With a secured loan, you will need to provide an asset as security, such as a car. Secured loans can benefit from lower rates, longer loan terms and the ability to borrow larger amounts. They’re great if you own an asset outright, or are looking to buy a car. However, if you don't repay the loan on time, the lender has the right to seize and sell your asset.

With an unsecured loan, You don't have to put up an asset for security. The benefit of an unsecured loan is faster, simpler application and assessment, so you could get the money faster.

What happens if I can’t meet my loan repayments?

If you need short-term or medium-term assistance with your repayments please get in touch with us immediately. Our customer service team can discuss options with you that can include flexibility with instalments due, time extensions & other hardship solutions depending on your circumstances.

How is the interest rate of my loan calculated?

Our interest rates are personalised for each customer and are determined based upon factors such as your credit score - the higher your score, the lower your interest rate.

Are there any additional fees or charges on top of my loan repayments?

We charge a one-off establishment fee that is included in your total loan amount. There are no monthly fees or early repayment fees. You can learn more about how our rates and fees work here.

How much can I borrow?

The amount you can borrow depends on the loan options you choose and your serviceability (this is a calculation of how much you can afford to repay)

With an unsecured personal loan, you can borrow from $5,000 to $50,000. However, if you choose our secured option, you can borrow up to $70,000.

With either option, you should borrow the amount that best suits your situation, making sure you will be comfortable paying off each instalment.

What loan terms can I choose from and can I pay my loan off early?

We offer 2, 3 or 5 year terms with our unsecured loans, or up to 7 years with our secured loan option.

You also have the freedom to pay out your loan early in full or make additional lump sum payments during the life of your loan with no extra fees or penalties.

What repayment options are available?

Personal loan repayments can be made in either fortnightly or monthly instalments by direct debit.

Your regular repayments are calculated based on your loan amount, interest rate, loan term (2, 3 or 5 years with an unsecured loan or up to 7 years with a secured loan), and whether you have chosen fortnightly or monthly repayments.

How long will it take for me to receive my funds?

Once you're approved the funds will be transferred to your bank account, usually within 24 hours.

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Your Complete Guide To Personal Loans

Table of contents

What is a personal loan?

Key Factors to Consider before Applying

How much are you looking to borrow?

Do you have a bad credit rating?

Do you have any equity you can use as security?

Do you need one lump sum, or will you need more funds during the loan term?

What Personal Loan Types are Available?

Unsecured Loans

Secured Loans

Variable Loans

Fixed Loans

Overdraft

Line of Credit

Secured vs. Unsecured Loans

Use our loan calculator to get your free personalised rate

Benefits & Drawbacks of Personal Loans

Advantages

Disadvantages

Did you know?

What Documents are Needed to Apply for a Loan?

Proof of identification

Proof of income

Statements from other loan accounts/credit cards

Common Reasons for Personal Loan Application Rejections

Bad credit history

Low income

Unstable employment history or non-existent employment history

Incorrect personal details

Credibility of loan purpose

Low-value equity

Amount of loans already open

Tips for getting your application approved

Understand your eligibility

Double-check your personal details

Check that your equity meets requirements

Take a look at your loan portfolio

Check the credit requirements

Check your loan purpose is allowed

Ensure you meet employment requirements

Find out the min. income requirements

Frequently Asked Questions

Eligibility criteria for personal loans

What will I need to get a personal loan?

What is the process of applying for a personal loan?

How much can I borrow, and for how long?

I've forgotten my password

What are the interest rates?

Fixed interest rate

Comparison rate

Are there any fees?

Establishment fee‍

Late Repayment Fee

Direct Debit Dishonour Fee

Early repayment fee

Are there any certain amounts or terms I should be aware of?

Loan amount limits‍

Loan terms‍

Is a credit check mandatory in order to apply for a personal loan?

Can I apply for a personal loan if I am currently unemployed?

What’s the difference between a secured personal loan & an unsecured personal loan?

What happens if I can’t meet my loan repayments?

How is the interest rate of my loan calculated?

Are there any additional fees or charges on top of my loan repayments?

How much can I borrow?

What loan terms can I choose from and can I pay my loan off early?

What repayment options are available?

How long will it take for me to receive my funds?

Have some more questions?

Ready to apply for a personal loan?