How to get a low interest personal loan

Right, first things first, what actually is a low interest personal loan? Well, the definition of a personal loan is an amount of money lent out by a credit provider to an individual, which is then paid back in regular instalments, plus interest. 

In Australia, the lowest interest rates available on the market are highly influenced by the economy and the Reserve Bank of Australia cash rate. The lower the cash rate, the lower the personal loan rates available. This means that what’s considered a low rate personal loan can change depending on how high or low the cash rate is at any given time. 

It’s important to remember though that although each finance provider will have a lowest interest rate available, the amount of interest applied to a loan is actually dependent on you and your credit score. This is your personal loan rate.

Your personal loan rate is calculated based on multiple factors, such as your credit score, living arrangements and the loan amount you’re looking for.

When a lender calculates your personal loan rate, they need to work out how risky it would be to lend you money i.e. are you actually going to pay them back? To work this out, lenders will turn to your credit score. This is because your credit score is an evaluation of how well you’ve managed repaying borrowed money in the past. 

If you have a strong credit score (go you!) lenders are going to be more confident lending to you and you’ll earn yourself a lower interest rate. On the other hand, if your credit score isn’t looking too healthy, you’ll be offered a higher interest rate as it’ll appear that you’re a riskier person to lend to. 

Other factors can also have an impact. Your income, spending habits and how much debt you already have can also influence whether you’ll be able to comfortably repay your loan and will affect the interest rate you’re offered.

Your eligibility for a low rate personal loan is influenced by a number of factors including your:

• Credit scores

• Living arrangements

• Debt-to-income ratio 

• Income surplus

• Spending habits

• Employment type

• Age 

• Collateral 

All lenders will have their own eligibility criteria, although generally you’re more likely to be eligible for a low rate personal loan if you have a good credit score, low debt-to-income ratio and enough money left over each month to comfortably afford your loan repayments.

Now, that’s an easy one. To get a rate estimate, you can simply head to our rate estimate form, tell us a bit about yourself and the loan you’re looking for and we’ll do the rest.

If you do decide to go ahead and apply for a Wisr personal loan, we’ll then need to run a hard search enquiry to make our lending decision. Just note that this will impact your credit scores.

Absolutely! The best way to improve your interest rate is to give your credit scores a boost. This can take a little time, so it’s a good idea to plan ahead if you’re hoping to apply for credit in the future. 

Here are our top tips on improving your credit scores:

• Check for errors on your credit report: if you find any, contact the credit reporting agency to rectify them as soon as possible. 

• Consistently make your credit repayments on time: setting up direct debits can help make sure that you never miss a payment.

• Reduce the amount of credit available to you: lower your credit limits on credit cards or cancel cards that you don’t use.

• Repay as much outstanding debt as possible: this will lower your debt-to-income-ratio.

• Pay your bills on time: these bills will need to be in your name for you to get the credit score benefits.

• Avoid making multiple credit applications: making lots of credit applications in a short space of time can lower your credit score. 

Want to check in on your credit scores and get a few personalised insights on how to improve them? Download Wisr App today and view your credit scores in just a few minutes.

As we mentioned earlier, if you’re happy with your rate estimate you can go ahead and apply for your low rate personal loan. Your chosen lender will usually provide you with their lending decision within a couple of days.

Not eligible for a low rate loan? While low interest rates might not be available to you right now, putting aside a bit of time to strengthen your credit scores is one of the best ways to make yourself eligible for better loan rates.

Want to quickly find out what interest rate you qualify for? Get a rate estimate now to see where you stand.