How to Save Money on a Personal Loan

Personal loan interest is set by a handful of things you control: the type of loan, the rate you compare it on, whether you offer security, what your credit file says, how long the term runs and which fees you accept. Get those right and the same amount borrowed for the same purpose costs less, sometimes by thousands over the term.

This guide works through them in the order they come up. The examples use a $50,000 loan at an illustrative rate of 7.99% p.a. so the effect of each decision is easy to see; the rate you are offered depends on the lender, the purpose and your circumstances.

1. Talk to an Expert

Personal loan rates spread widely between lenders for the same borrower, and the fees spread wider. A finance broker compares products from many lenders against your situation, knows which lenders price well for a strong credit file, a thin one or a secured loan, and can point out the fees that make a low headline rate cost more than it looks. Emu Money's finance specialists compare options from 50+ lenders in a few minutes. Complete the get started form and someone will be in touch. A quote does not affect your credit score.

2. Compare the Comparison Rate, Not the Headline Rate

The advertised rate is only part of the cost. The comparison rate folds the interest rate and most fees into one percentage, which is why lenders are required to show it, and it is the number to compare between offers. In Moneysmart's illustrative example, a loan advertised at 3% with a 6% comparison rate is likely to cost more than one at 4% with a 4.5% comparison rate. Compare loans on the same amount and term, because the comparison rate is calculated on a set example that may not match yours, and check what sits outside it, such as early repayment fees and optional insurance.

3. Choose the Right Product

An unsecured personal loan is the standard product: no asset is pledged, the lender relies on your income and credit history, and the rate reflects that. A secured personal loan uses a car or another asset as security and usually carries a lower rate. A fixed rate keeps the repayment the same for the term, which suits a tight budget; a variable rate can fall and can rise, and Moneysmart suggests checking you could still afford the repayments if the rate rose by two or three percentage points before choosing one. Variable loans more often allow extra repayments and early payout without a fee, which matters if you plan to clear the loan early.

4. Use Security Where It Makes Sense

Offering a car or another asset as security lowers the lender's risk, and the rate follows. It can also open the door for someone whose credit history is thin. The trade-off is that the lender can take and sell the asset if you do not repay, so a secured loan suits a borrower with steady income who would keep the asset anyway, and suits a loan that is small relative to the asset's value. For a short loan or a small amount, the paperwork and the risk may not be worth the saving.

5. Look After Your Credit Score: It Sets the Rate Tier

On an unsecured personal loan the credit file is most of the pricing. Many lenders publish a rate range rather than a single rate, and where an application lands in that range is decided largely by the credit score, so two people borrowing the same amount over the same term can be quoted rates several percentage points apart. The score reflects how much you have borrowed, how many applications you have made and whether you pay on time, and a default stays on the report for five years.

Get a free copy of your credit report before applying; you are entitled to one every three months from each of the two credit reporting bodies, Equifax and Experian. Dispute anything that is wrong, clear or reduce card balances, and avoid a run of credit applications in the months before, because each one is recorded and read as risk.

6. Show the Repayments Fit Your Budget

Personal loans are assessed under the responsible lending rules, so the lender must be satisfied the repayments fit your income after rent or mortgage, existing loans, card limits and living costs, and it reads recent bank statements to check. Existing credit card limits count against you even when the balances are nil, so closing an unused card before applying can lift the amount a lender will approve. Regular income and no dishonours help; frequent buy now pay later instalments and gambling transactions hurt.

7. Personal Loan Interest Grows With the Term, so Keep It Short

Every extra dollar borrowed and every extra month on the term is interest. A shorter term means higher repayments and less interest: on a $50,000 loan at the illustrative 7.99% p.a., a 12 month term costs about $8,624 less than a 60 month term, at more than four times the monthly repayment.

Pick the shortest term the budget can carry comfortably, and check whether the loan allows extra repayments without a fee, so a bonus or tax refund can shorten it further.

8. Set the Repayment Date, Not Just the Frequency

Fortnightly repayments shave a little interest off a monthly schedule because the balance falls slightly faster, and some lenders charge a fee per direct debit that cancels the gain. The date matters more than the frequency: set the repayment to land the day after pay day, because a missed personal loan repayment costs a late fee, can be reported on the credit file and, on a variable loan, may forfeit any rate discount for on-time payment.

9. Watch the Fees and the Add-Ons

Establishment fees, monthly account fees, direct debit fees, late payment fees and early repayment fees all sit outside the headline rate. Two things to check before signing: whether extra repayments and early payout are free, and whether optional extras such as loan protection insurance have been added to the amount financed, which means paying interest on them for the whole term. Decide on each add-on separately, and ask for the full fee schedule in writing.

10. Refinance or Consolidate When It Pays

Refinancing replaces the current loan with a new one at a lower rate or a shorter term. It is worth checking when your credit position has improved since the original loan, when market rates have moved (the RBA cash rate rose to 4.35% in May 2026 and was held there in June and August), or when several debts could be consolidated into one loan at a lower rate.

Compare three numbers: the early repayment fee on the current loan, the establishment fee on the new one, and the interest saved over the remaining term. Consolidation has its own trap: a lower rate over a longer term can cost more in total than the debts it replaces, so compare the total amount repaid, not the monthly figure. A finance specialist can model the comparison for you.

Subject to lender approval, terms, and conditions apply.