Whether you’re planning a holiday, consolidating debt, or covering a big expense, a personal loan can help you reach your financial goals. But with so many options available, how do you know which loan is right for you?

Here’s a simple guide to help Australians choose the right personal loan with confidence.

1. Understand Why You Need the Loan

Before you borrow, clearly define your purpose. Are you looking to:

• Consolidate credit card debt?
• Cover unexpected medical costs?
• Renovate your home?
• Fund a wedding or big event?

Some lenders may not lend based on your purpose.

2. Compare Interest Rates

Personal loans come with fixed or variable interest rates:

• Fixed rate loans offer predictable repayments but less flexibility.
• Variable rate loans may offer lower initial rates but can fluctuate.

Make sure you compare the comparison rate, which includes the interest rate plus most fees, giving you a clearer picture of the loan’s true cost.

3. Check Fees and Charges

Some personal loans come with:

• Upfront application fees
• Monthly account-keeping fees
• Early repayment penalties

Read the fine print to avoid nasty surprises down the track.

4. Look at Loan Features

Some lenders offer handy features like:

• Extra repayments without penalty
• Flexible repayment options (weekly, fortnightly, monthly)

These features can help you pay off your loan sooner and save on interest.

5. Know Your Credit Score

Lenders assess your credit report when deciding whether to approve your loan and at what interest rate. A better credit score can mean access to lower rates. You can check your credit score for free through providers like Equifax, Experian, or illion. Some lenders do not lend if you do not have a credit score.

6. Speak to a mortgage broker

A mortgage broker can help you compare different lenders and loan options based on your individual situation. They’ll consider your goals, income, credit score, and lifestyle to match you with the right loan.