How and Why Do Personal Loan Interest Rates Differ for Each Borrower?

When comparing personal loan rates, you may notice that they differ with the provider. Also, the same bank may not offer the same interest rate for everyone.

Alex – personal loans provide easy approvals with low interest rates. These unsecured personal loans don’t need your assets as security, and you receive the funds almost immediately. 

Different Personal Loan Rates for Applicants

The amount you pay every month depends on your borrowing capacity. After you submit your personal loan application, the lender performs a personalised credit check. They also assess your income, expenses, and other liabilities to arrive at an interest rate.


You should hold a steady job where you receive regular income. If you change jobs often or have irregular income, the rate can shoot up. Sometimes, the provider may decline the application altogether.


If you have current financial obligations, a significant part of your income may go towards that. Lenders may feel that approving the loan is risky, and hence, can charge more. If the debt is too high, your loan may even be rejected entirely.

Credit Score

Having an excellent credit rating means that you are timely in your loan repayments. Lenders view this as a good sign, and your borrowing capacity increases. In contrast, if there are missed or late payments on the credit report, the rate can go up.

How to Lower Payments

The interest rate determines how much you have to pay every month. If the interest rate is high, your overall payments are bound to be high as well. 

Here are other crucial factors that impact your payments:

Loan Amount

Suppose borrower A needs $20,000 and borrower B applies for $10,000. When all other things remain the same, the interest rate for borrower B will be lower, simply because the loan amount is lower. Usually, personal loan limits will start from $2,100 and go up to $30,000.

You can use personal loans to meet various expenses. Some of these include:

  • Home renovation
  • Debt consolidation
  • Cosmetic surgery
  • Holiday, etc.

Loan Term

The time you pick to pay off your loan is called the loan term or repayment period. For personal loans, it can be anywhere between six months to five years. If you choose a longer duration, your monthly payments will be lower.

Repayment Frequency

You can choose to pay off the loan in weekly, fortnightly, or monthly payments. Choose the frequency per your convenience and enjoy massive savings. It will also be less hassle when you choose fewer payment dates.

Compare Personal Loans Based on Interest Rates

When you choose a lower rate, your monthly payments will be lower, and so will your burden. You also have the flexibility to make extra repayments to clear the loan sooner.

But before picking a bank, check whether the rate is fixed-type or variable-type. The key difference between these two is the reason why interest rates vary with each provider.

Fixed-Rate Personal Loans

You can compare rates and lock in a low rate for the length of your loan period. It gives you certainty about the future, where you pay the same amount every month.

Currently, Alex – personal loans top the charts in Australia. When you choose their fixed-rate personal loan, you have protection against rate fluctuations. You can set future financial goals and plan the budget accordingly.

Variable-Rate Personal Loans

If your interest rate changes during the repayment period, it is known as a variable-rate personal loan. You may also have flexibility in making unlimited extra repayments. But it will come at the risk of the unpredictability of your next payment amount.

The primary deciding factor for you in choosing a credit provider is the rate. Other factors like upfront charges and ongoing fees also matter. Besides, personal loan applications and approval should be a seamless experience.

Some banks credit the amount within one business day. It is beneficial when you plan something impromptu and need money. So, make an informed decision by choosing the best lender.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.