Compare Variable Rate Personal Loans - Australia

A variable rate personal loan can seem like an attractive option because it’ll enable you to benefit from interest rate decreases, however what happens when interest rates increase?

Choosing a suitable loan can be unnecessarily complex and confusing. We believe everyone should be able to make an informed decision about a suitable loan for their circumstances. That’s why we put together this guide — to help you compare a range of variable rate personal loans and choose one that’s suitable for your needs.

A variable rate personal loan is a loan product that provides credit for a range of purposes and expenses. Some personal loans may even be able to be used to consolidate multiple debts to help make them easier to manage. Common expenses could be things like a holiday, home renovations or a medical procedure. In fact, you can finance almost any product or service you like using a variable rate personal loan, subject to the eligibility criteria of the loan you apply for.

The feature that unites these loans is their changeable interest rate, which can go up or down by any amount at any point across the life of the loan. That means the size of your repayments can change at any time. You will get some warning before a new rate comes into effect, though.

Variable rate personal loans work much like any other standard loan. First, you apply for the loan. Your lender will then assess your ability to repay the loan with interest based on a set of lending criteria. To do that, the lender will look at various aspects of your personal and financial situation.

If the lender decides to approve you for the loan, it’ll send you a formal loan offer. You’ll then sign all the loan documents and your lender will give you the money, as early as the next day with some lenders. Your lender will send you regular statements that will tell you the minimum amount each repayment must be. It’ll then be up to you to make sure you make those repayments on time.

Variable rate personal loans are usually either:

• Unsecured personal loans, which don’t require an asset as security, but may come with a higher interest rate
• Secured personal loans, which require you to provide an asset as security, but may offer a lower interest rate

The key difference with a variable rate personal loan is that the interest rate can change at any time, with notice. For example, if the Reserve Bank of Australia lifts the cash rate, your lender might choose to lift the interest rate of your loan along with it, or vice versa.

Variable rate personal loans can be an attractive option for borrowers looking to take out a loan. Here are some reasons you might decide to consider a variable rate personal loan, and what to look out for:

• Potential for lower interest rates. The interest rate on a variable rate personal loan can fluctuate over time, but it can often start at a lower rate compared to a comparable fixed rate personal loan. This means you could save money on interest charges. It's important to note, however, that the interest rate could also go up and there are no guarantees, so you should be prepared for this possibility and do your research.
• Flexibility. Variable rate personal loans can be more flexible than fixed rate personal loans. This is because it’s more common to be able to make extra repayments without incurring penalties. Some variable rate personal loans may also allow you to redraw funds if you need them. So you could pay off your loan faster and potentially save on interest charges.
• Options for refinancing. If you have a variable rate personal loan, you may have the option to refinance if interest rates go up. This means you could switch to a fixed rate loan, which would give you more certainty around your repayments. Alternatively, you could refinance to another variable rate loan with a lower interest rate. It’s always a good idea to check the terms and conditions of your loan to check if there are any penalties for refinancing your loan.

When considering a variable rate personal loan, it's important to compare a range of options to find a great deal for your needs. This means looking at the interest rate, fees, and other features of the loan – you can start with the comparison table on this page.

There are a range of factors to be aware of when considering a variable rate home loan. These can include:

• Loan amount — the amount of credit the lender is willing to give you
• Loan term — the amount of time you’ll have to repay the loan, which is often between one and seven years
• Initial interest rate — this dictates how much interest you’ll have to pay when the lender first grants you your credit (remember, it can change at any time)
• Initial repayment amount — this is the amount you have to pay for each repayment when your lender first grants you your credit (it too can change at any time)
• Repayment frequency — you’ll usually have the opportunity to choose whether you want to pay weekly, fortnightly or monthly
• Loan terms and conditions — the conditions of the loan, including other fees you may have to pay, such as a fee for paying off your loan early or making extra repayments
• Loan special features — things like a redraw facility, which will enable you to take back extra repayments if you have unexpected expenses
• Security (if it’s a secured personal loan) — the thing your lender can repossess and sell if you fail to pay off your loan (an unsecured personal loan won’t have this)

It’s key to remember that, with a variable rate personal loan, the interest rates can change at any time with notice from the lender.

If you’re wondering why your interest might change over the course of your loan, there’s an excellent reason. It can be a little complex though, so bear with us!

Your lender is likely to fund your loan partially with money deposited in savings accounts by other customers, and partially with money it borrows from another financial institution. Existing savings are likely to make up only a small portion of the money you’re lent. So, if your lender wants to make a profit from your loan, it has to make sure the interest you pay is more than the interest it pays on its loan.

Every month (except January), the Reserve Bank of Australia (RBA) has a meeting at which it sets the official cash rate. The RBA sets the cash rate based on a wide variety of factors, such as the rate of inflation or wages growth.

The cash rate is a key factor in the interest rate banks pay when they borrow money from each other, along with a range of other market factors. And lenders generally look to maintain a markup on these costs and the cash rate.

So, because the market and the cash rate can change, your lender will look to change the interest rate it charges you. That’s where the variable rate personal loan comes in.

To offer a fixed rate personal loan, a lender has to predict what will happen in the market and to the cash rate. They’re usually pretty good at predicting the cash rate, but they may like to have a buffer in case the cash rate moves unexpectedly.

The amount you can borrow with a variable rate personal loan will depend on a few factors, including your credit score, income, existing debts, and other financial obligations. Lenders will typically look at these factors to determine how much they’re willing to lend you, and what interest rate they will offer you.

Typically, lenders will have a minimum and maximum loan amount, and the amount you’re approved for will depend on your financial circumstances. It’s also worth noting that the interest rate on a variable rate personal loan can change over time. This means that if the market changes, your interest rate could go up or down, which could impact your monthly repayments. If you’re considering a variable rate personal loan, it’s important to factor in this potential volatility and make sure you can afford any potential increase to your repayments.

Calculating interest charges on a variable rate personal loan can be a bit complicated, but with the right tools and information, it can be estimated quickly and accurately. Here’s how you can do it.

• Step 1: Determine the interest rate. Variable rate personal loans have interest rates that can change over time, so it's important to have the most up-to-date information. Check with your lender to find out the current interest rate on your loan.
• Step 2: Determine the loan amount. This is the amount that you borrowed and will be used to calculate the interest charges.
• Step 3: Determine the loan term. The loan term is the length of time that you have to repay the loan. This will also be used to calculate the interest charges.
• Step 4: Use a variable rate personal loan calculator. To make the calculation easier, you can use a personal loan calculator like the one available from MoneySmart. This will allow you to input the interest rate, loan amount, and loan term, and will provide you with an estimate of the repayments and total interest charges that you will pay over the life of the loan.
• Step 5: Compare variable rate personal loans. This will help you determine if you are getting a good deal on your loan. Look at the interest rates, loan amounts, and loan terms of other variable rate personal loans to determine if you can save money by switching to a different loan – you can start with the comparison table on this page.

Remember, because the loan interest rate is variable the repayment amount and interest charges can change over the life of the loan.

There’s no single best variable-rate personal loan because everyone’s financial situation is different. So, one way to pick a suitable variable rate loan is to compare a range of options in the context of what you need and what you want to achieve.

Our main personal loan comparison page includes a detailed guide to comparing personal loans. You can t add these questions into the mix to help your comparison:

• Does your income fluctuate? If your income or other expenses vary substantially between months, quarters or seasons, you might appreciate having a more flexible loan. Some products will allow you to make additional repayments without a penalty when your income is high and to redraw some of that money if challenging expenses arise.
• Can you foresee having additional, large ad hoc expenses in the future? If so, you might appreciate a variable-rate personal loan that can also act as a line of credit. Some loans may enable you to withdraw not just extra repayments but some of the mandatory repayments, in effect giving you another loan without you having to submit another application. They work in a similar way to a credit card except they often have a lower interest rate.

Taking some time to consider the pros and cons of a variable rate personal loan could also help you decide if this type of loan is the best option for you.

You can use a variable rate personal loan for a wide range of purposes, including:

• Debt consolidation. One common use for a variable rate personal loan is to consolidate existing debt. By taking out a single loan to pay off multiple debts, you can simplify your financial situation and potentially save money on interest charges.
• Home renovations. If you're planning to renovate your home, a variable rate personal loan can be a convenient way to finance your project. Whether you're upgrading your kitchen, adding an extra room, or installing a new bathroom, a personal loan could help you cover the costs.
• Car purchase. A variable rate personal loan is one of many ways to finance a new or used car purchase. Other financing options for cars include dealer finance, specialist car loans and car leasing.
• Travel expenses. Whether you're planning a dream holiday or just need to travel for work, a variable rate personal loan can help you cover the costs of your trip. With a personal loan, you can pay for your flights, accommodation, and other expenses upfront and then pay off the loan over time (plus interest).
• Medical expenses. If you're facing unexpected medical bills, a variable rate personal loan could be a helpful tool for covering the costs. With a personal loan, you can pay for medical treatments, procedures, and other expenses without having to worry about how you'll pay for them upfront.

As with any financing it’s important to make sure you can afford the repayments before committing to taking out a loan. It’s always worth remembering that a loan will include additional charges, such as interest and fees.

Personal loan waiting time can vary depending on the lender you choose, the type of loan you're applying for, and your personal financial situation. Generally, the application process for a variable rate personal loan can take anywhere from a few hours to a few days. Some more complex applications may take weeks, however some lenders will provide an answer within 24 to 48 hours.

If you're applying for a personal loan from a bricks and mortar bank or credit union, you may need to schedule an appointment to meet with a loan officer. This process can take longer because you'll need to make time for the appointment.

But if you're applying with a bank or lender online, the process may be much quicker. Many online lenders offer a streamlined application process that can be completed in just a few minutes, and, depending on your circumstances, you could receive a decision on the same day.

To speed up the application process, it helps to have all the necessary documentation on hand before you start your application. This includes your identification, proof of income, and any other documents required by the lender. By having all your information ready to go, you can streamline the application process and increase your chances of being approved quickly.

It's important to note that the waiting time for a variable rate personal loan can also be affected by your credit score and financial history. Lenders will review your credit score and credit history to determine your eligibility for a loan and to set your interest rate. If you have a lower credit score or a history of missed payments or defaults, it may take longer for a lender to assess and approve your loan application.

Refinancing a personal loan is a financial move that many Australians consider, especially when interest rates are going up. Refinancing a loan involves taking out a new loan to pay off the old one. The new loan often has different terms and conditions, such as a lower interest rate or a different repayment schedule. Refinancing can help you save money on interest charges, reduce your monthly payments, or provide you with more favourable loan terms.

It's important to carefully review the terms of your new loan before you commit to it, including the fees associated with refinancing, such as application fees, early repayment fees, and ongoing fees. This can help to make sure switching loans is a suitable move, and you’re not out of pocket after refinancing.

When you apply for any type of credit, including a personal loan, the lender will typically check your credit score to assess your creditworthiness. This credit check, also known as a credit inquiry, can have a small negative impact on your credit score.

Once you’re approved for a personal loan, making on-time payments is essential to maintaining a good credit score. Missing payments or defaulting on a loan can have a significant negative impact on your credit score and can stay on your credit report for several years.

It's essential to keep in mind that other factors can also impact your credit score, such as your credit utilisation ratio (the amount of credit you’re using compared with the amount of credit available to you), the length of your credit history, and the types of credit you have. So, taking out a personal loan, whether it's a variable or fixed rate, should be done with careful consideration of your financial situation and ability to make payments.

To assess your eligibility for a variable rate personal loan the lender will assess your application against their lending criteria. The lender will look at a variety of factors that can include:

• Your income
• Whether you have any other debts
• Your other expenses
• Whether you’re single or have a partner
• If you’re borrowing by yourself or with someone else
• Whether you have any children or other dependents
• Your credit history and credit score (a number that helps indicate how trustworthy you are when it comes to repaying debt).

There’s no way we can tell you exactly how to pick your ultimate variable rate personal loan. Instead, we’ve given you jargon-free facts to help you understand how variable rate personal loans actually work. And then we’ve laid out simple, easy-to-follow questions to help you compare a range of options, so you have tools to help you choose a variable rate personal loan that’s suitable for your needs.