Lock into certainty with a fixed rate personal loan.
Fixed rate personal loans let you lock in a rate at the beginning of your term, keeping your repayments set for the duration of your loan. This type of loan comes with a lot of benefits, but also a few added restrictions. We break down how fixed rate personal loans work in this guide to help you decide if it’s right for you and what your options are.
How do fixed rate personal loans work?
Fixed rate personal loans have an interest rate that won’t increase or decrease for the duration of the loan term. Typical fixed rate personal loans last from one to five years, but some extend up to seven years.
Having your repayments remain fixed for the life of a loan is a big benefit, but it’s important to understand fixed rate personal loans may come with restrictions – these mostly have to do with repayments. For example, you may not be able to make additional repayments, you may only be able to make repayments up to a set amount and you may also not be able to repay the loan early without a fee.
Compare fixed rate personal loans
What other features should I consider?
Here are four typical features you can compare in addition to the interest rate:
- Loan term. Lenders offer varying loan terms depending on the type of loan it is (secured or unsecured) as well as a number of other factors. You can usually expect a term between one and five years, some lenders extend up to seven years. Some loans may have hybrid interest rates where part of the term is fixed and the other part of the term has a variable rate attached.
- Repayment stability. No matter what happens to rates in the market, the interest rate is fixed and that means your repayments stay the same for the entirety of your loan term.
- Early payment penalties. Fixed rate personal loans can come with fees for paying your loan back early or for making additional repayments. You might find some lenders only charging fees if you repay your loan within a certain period, for example, in the first year.
- Upfront and ongoing fees. Look out for origination fees or annual fees. These aren’t standard for fixed rate personal loans, so remember to compare what’s available.
What can you use a fixed rate personal loan for?
Personal loans that come with a fixed interest rate can be suitable to help you finance a wide range of different purposes, including:
Four important questions to ask before applying
Given there is no shortage of fixed rate personal loans to choose from, compare your options so you end up with the best possible deal. You’ll need to consider the following:
- Is the loan secured or unsecured? When looking to buy a vehicle or property, you can consider a secured fixed rate loan and use the asset you own or are looking to buy as security. Secured loans come with lower interest because they’re less risky for lenders – you’ll lose your asset if you fail to repay the loan.
- What’s the interest rate? This is the rate you will be paying for the whole term of your loan. Compare the loan against competing lenders to get the best deal possible.
- How long is the loan term? You can expect most lenders to offer repayment terms of between one and five years, but some lenders offer up to seven years. You can lower your repayments with a longer term, but you will ultimately pay more interest.
- What fees and penalties will I be charged? Look out for penalties for late payments, upfront charges such as origination fees, any ongoing month or annual fees, and what you will be charged if you repay the loan early or make extra repayments.
Benefits and drawbacks of fixed rate personal loans
- No change in what you pay. Your monthly repayments will stay the same for the entire loan term, allowing you to easily budget.
- Your rate won’t be affected if the market conditions take a turn. If market interest rates decrease, you won’t have to worry about your interest rate increasing.
- You still have flexibility with your repayments. Most lenders offer loans with monthly payments. But you may be able to find an offer with biweekly payments if your term is less than five years.
- You can’t benefit from favorable market conditions. If market interest rates improve, the rate applied to your loan won’t decrease.
- There may be restrictions on your repayments. You may not be able to make additional repayments or repay your loan early without a penalty fee.
What to watch out for
- Taking on a longer loan term than you need. While your repayments might be lower with a longer loan term, you will end up paying more interest. Budget your repayments before you apply and work out a repayment period you can afford.
- Taking a loan you can’t afford. Do the math to make sure you’ll be able to repay the loan before you apply. This is a must if you take out an unsecured loan, as you stand to lose your collateral. Also, defaulting on a loan can leave a black mark on your credit report for up to seven years.
- Not reading the fine print. Go over your loan contract so you’re aware of all fees, charges and conditions.
Here’s how you can apply in 3 easy steps
- Compare + Click. Use the table above to compare your fixed rate personal loan options. Once you find a loan that’s right for you, you can click on the lender’s name to either read a more detailed review or to start the application process.
- Eligibility + Application. You will need to meet minimum income, employment and credit requirements before submitting your application. Online applications differ, but generally, you will need your personal, financial and employment details.
- Approval + Funding. You can usually find out if you’re approved or conditionally approved within a few minutes, but some lenders may take longer. You can always check back with the lender to find out about the status of your application. If you’re approved, your loan can be funded any time from that same day to a week later. Check with the lender for details.
More guides you may be interested in
There are many different types of loans and some may be better for your individual situation than others. Compare the options below.
These loans allow you to finance just about anything you want without putting up collateral.
Have an asset you could use to secure the loan? You could potentially get a lower interest rate.