In Australia, personal loan lenders advertise a range of interest rates (e.g., 6.99% p.a. to 19.99% p.a.) because the actual rate a borrower gets depends on their individual risk profile. Here’s why that happens:
Your Risk Profile
Lenders assess how risky it is to lend to you. The lower the risk, the lower the interest rate you’re likely to get. The key factors lenders look at include:
- Credit score/history: A higher score usually means better rates.
- Income & employment stability: More stable income lowers the perceived risk.
- Existing debts: If you already owe a lot, the lender might see you as higher risk.
- Loan amount and term: Larger loans or longer terms may attract higher rates.
So while the advertised rate (sometimes called a “comparison rate”) might look low, it often applies only to borrowers with excellent credit profiles.
Regulatory Requirements
In Australia, lenders are required by ASIC (Australian Securities and Investments Commission) and under consumer credit laws to be transparent. That’s why they must show both the lowest and highest rates that could apply. This gives consumers a realistic idea of what they might be offered.
Personalised Loan Offers
Most lenders now offer pre-approval checks or loan rate estimators (with no impact on your credit score) to show what rate you might qualify for. This helps consumers shop around more easily.
Summary
Lenders show a range of interest rates because each borrower gets a customised rate based on their financial situation and risk level. The range reflects how rates can vary from highly qualified borrowers (low rates) to higher-risk applicants (high rates).