In this week’s episode Walshy demystifies personal loan pricing:

  • How much does a personal loan cost?
  • How can I compare personal loan costs?
  • How do I know if a personal loan is right for me?

Watch on to find out!


Welcome to Whiteboard Wednesday.  Today’s topic is looking at the costs and charges of personal loans.Hopefully this’ll help you choose the right lender and the right loan for you.So the things we will cover are the types of charges, things that you should consider when applying for a loan and then what you should do to minimise the cost of the loan.


Type of charges on personal loans

The types of charges are pretty consistent across different lenders, they mix them up to compete in the market.

So the types of charges are things like establishment fees when you take a loan out, an interest rate you get charged or a monthly fee, when you’re repaying the loan some lenders charge a payout fee and that’s a pet hate of ours because we want to see customers repaying their loans and not being penalised for that.


What to consider when choosing a personal loan

So in terms of things to consider when applying for a loan, it’s really important that you understand your credit profile.  This will drive access to and the price you pay for credit.  So someone with a clean credit history for example, is going to pay a lower establishment fee, a lower interest rate and those lenders are in a highly competitive market and there may be no termination fees.

Whereas people with bad credit, or are credit impaired, are typically going to pay a high establishment fee, a higher interest rate/monthly fee and/or no early payout fee.

So understanding your credit profile is really important to understanding what cost you should expect to be paying in the market, or from a lender.


How to minimise the cost of a personal loan

So what you should do to minimise the cost – understanding your credit profile is critical to that – knowing what your credit score is, your conduct on your bank statements.  What is a lender going to look for to see a level of risk around you?  Your prior behaviour is a key determinant of that risk and hence the charge you’re going to pay.

So in terms of what you need to do to minimise that, once you’ve understood your credit profile, identifying lenders that will lend to borrowers similar to yourself.  It’s really important that you understand how much you can afford to repay; you don’t want to borrow too much, you don’t want to borrow too little and you want to make sure the repayments you pay are affordable so that you don’t trigger other fees on loans like default fees, dishonour fees, etc, because they can really add up too.

So by doing a budget, by doing some market research and entering a contract where you feel it gives you the right options is critical to making sure you get the right loan.

Hopefully you found this useful, for more information like this, follow us on Twitter @FairGoFinance or subscribe to our Youtube channel.  Thanks very much.


scribbled whiteboard

Image from Carsten Kessler




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It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.