Calculate your monthly repayments, total interest, and total cost for any personal loan.
How Personal Loan Repayments Are Calculated
Personal loans use the standard amortisation formula (PMT) to calculate a fixed monthly repayment. Each payment covers the month's interest first, with the remainder reducing the principal balance. Because the balance decreases over time, the interest portion of each payment falls and the principal portion rises.
The Amortisation Formula
PMT = P × r / (1 − (1+r)^−n)
Where P = principal, r = monthly interest rate, n = number of monthly payments.
Fixed vs Variable Rate Loans
Fixed rate loans lock in your rate and repayment for the term, making budgeting easy. You may pay an early exit fee if you pay off early. Variable rate loans can change with market conditions — your repayment may rise or fall. Many lenders allow extra repayments on variable loans without penalty.
Comparison Rate
Lenders are required to display a comparison rate that incorporates the interest rate plus most fees. Always compare comparison rates, not just headline rates, to understand the true cost of a loan.
Frequently Asked Questions
What is the average personal loan interest rate in Australia?
Personal loan rates in Australia typically range from about 6% p.a. for secured loans up to 20%+ for unsecured loans. The rate you receive depends on your credit score, income, loan amount, and lender. Always compare comparison rates, not just headline rates.
What is the difference between a secured and unsecured personal loan?
A secured loan is backed by an asset (usually a car) which the lender can repossess if you default. Rates are lower. An unsecured loan has no collateral, so rates are higher but you don't risk losing an asset.
How is personal loan interest calculated?
Most personal loans use reducing balance (amortising) interest. Each month, interest is charged on the remaining balance. Your fixed repayment covers interest first, then reduces the principal. Early in the loan you pay mostly interest; later you pay mostly principal.
Can I pay off a personal loan early?
Most Australian lenders allow early repayment, but some charge an early exit fee, especially on fixed-rate loans. Check your loan contract. Paying extra even occasionally can significantly reduce your total interest cost.
How long should my personal loan term be?
A shorter term means higher monthly repayments but much less total interest. A longer term lowers repayments but costs significantly more overall. Most personal loans in Australia have terms of 1–7 years. Choose the shortest term your budget can comfortably manage.