Aussies love debt and CANSTAR’s research of 290 personal loan products across 78 lenders has found that there is strong competition across the market, with headline rates as low as 4.90% for a secured personal loan and 5.99% for an unsecured loan.
While our research has found that credit card interest rates have been largely unchanged even though our cash rate has fallen in recent years, personal loan rates have been much sharper.
Interestingly, it’s the smaller institutions that are leading the competitive charge, with all of the products that have been awarded a Five Star Rating for Outstanding Value in our most recent Star Ratings Report being from smaller institutions. It’s an indication that if consumers are looking for a personal loan product, they should think small.
This is also the first year that a peer to peer lender has received a five star award for Outstanding Value, with P2P platform Ratesetter, in its first year of operation, stepping up. Peer to peer platforms are relatively new to Australia, so it will be interesting to watch their development over the next few years; they will certainly be a competitive pressure on the traditional institutions.
Another competitive pressure is the current proliferation of credit card interest-free deals. While standard credit card interest rates haven’t shifted much, there has been a significant increase in the number of interest–free balance transfer deals.
Two years ago there was just one credit card on Canstar’s database offering a 12 month or more 0% balance transfer deal. This time last year, there were 23 credit cards offering 0% for 12 months or more; currently there are 60. So personal loan products need to offer something pretty special to get customers over the line.
Currently on Canstar’s database, the minimum, maximum and average advertised personal loan interest rates on offer are:
| Min | Max | Average | |
|---|---|---|---|
| Unsecured Personal Loan | 5.99% | 15.99% | 12.70% |
| Secured Personal Loan | 4.90% | 14.65% | 9.73% |
Source: CANSTAR personal loan star ratings, November 2015. Based on $25,000 over 3 years
There is quite a spread between the lowest and highest rates charged in all three personal loan categories, so it’s important to shop around for the rate and features you want.
