How to get the best interest rate possible on a loan 

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Personal Finance

Team MONEYME|17 December 2024| 2-minute read

If you’re thinking of applying for a personal loan, then you’re probably worrying about how much interest you’ll pay. Many loans come with high interest rates.  

However, did you know there are a few things you can do to get access to a lower rate?  

The interest rate you pay is based on many factors – from your credit score (which you can control) to market conditions (which you can’t, unless, of course, you’re head of the Reserve Bank).  

Here are four important ones.  

Your credit score 

A big influence on your interest rate is your credit score. It’s a number based on your credit history. 

A high score indicates you’ve managed credit reliably, while a low score suggests you’ve had a patchy past, such as missed repayment deadlines or failing to repay a debt altogether. 

The better your score, the lower the risk you present to lenders, and the lower the interest rate they’re likely to offer you.  

Check your score free anytime via the MONEYME app. And, if you’re keen to improve it, apply our expert tips. 

The loan: How much? How long?  

Another important factor is the loan itself.  

Depending on the lender, you might find that a bigger loan with a longer term attracts a higher interest rate.  

This is because bigger loans with longer terms tend to present greater risk for the lender.  

MONEYME offers flexible personal loans at low interest rates, so you can choose an amount and repayment plan that suits your budget. 

The loan: secured or unsecured?  

Personal loans are secured or unsecured.  

Secured loans, which must be backed up with an asset, such as a car, usually come with lower interest rates. Unsecured loans, which don’t need any back up, usually come with higher interest rates.  

This, again, comes down to the level of risk faced by the lender.  

An unsecured loan is less risky because, if you default, the lender can make a claim over your asset.  

However, if you default on an unsecured loan, the lender must take other steps, and typically it is a longer process to enforce repayment.  

Market conditions 

One factor you can’t control is market conditions.  

The Reserve Bank of Australia resets the cash rate 11 times per year – increasing it, decreasing it, or leaving it.  

When the cash rate changes, lenders usually change their interest rates to reflect it.  

Find out more  

Knowledge is power when it comes to your finances. That’s why we put together a comprehensive loan guide that covers everything you need to know, from what determines your interest rate to how to boost your chances of approval, and how to selecting the right loan for you. 

Get the free Personal Loan eBook to learn more about the lending industry and how to get the best deal.