A Comprehensive Guide to Personal Loan Fees

Most loans are not without some fees; understanding personal loan fees is vital to managing your finances. By gaining this knowledge, you're protecting your pocket and taking a significant step towards financial freedom.

This guide explains common personal loan fees and charges, what they are for, and how much you might expect to pay for them.

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Personal loan fees at a glance

In the last few years, fees on personal loans and other loans have declined, mainly due to increased competition among banks and lenders. According to a 2023 report by the Reserve Bank of Australia (RBA), upfront personal loan fees are on the way out, but ongoing service fees have seen a rise, reflective of evolving lending practices and a shift to online loan processing.

The RBA’s report shows that overall personal loan fees fell by 2% from 2021 to 2022, dropping from $337 million to $329 million.

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What are the most common personal loan fees?

Generally, personal loans can come with a range of additional fees and charges, which can include:

• Establishment fees;
• Ongoing fees (monthly, annual, or other);
• Extra repayment fees
• Early repayment fees;
• Missed repayment fees;
• Documentation fees;
• Encumbrance/REVV check fees;
• Risk fees
• Early exit fees;
• And of course, interest charges

A personal loan might come with many or few of these fees. This will depend on the individual lender and any other influencing factors (i.e. if you miss a repayment, a fee could apply). 

Many lenders also tend to have different fee structures for different kinds of borrowers: someone with an excellent credit history might pay fewer fees than someone with an average credit history, for example.

Establishment fees

An establishment fee (or application fee) is the upfront fee a lender charges for submitting your application. This fee can come as a standard rate or as a percentage of how much you are applying for. 

An upfront establishment fee typically exists to cover the costs involved in assessing your application and paying the staff to do so. It is generally only charged once.

Ongoing fees

Typically, the two main types of ongoing fees are monthly fees and annual fees. However, other ongoing fees are uncommon but still possible, such as semi-annual and quarterly fees.

Ongoing fees are all charged to cover the administration costs of managing your loan. The most common ongoing fee is a monthly fee, though some lenders don’t charge any ongoing fees whatsoever.

This fee can add up over time, so it's essential to account for it when calculating your estimated repayments and comparing your options.

Extra repayment fees

Some lenders may charge a fee if you make additional repayments on your loan beyond your minimum scheduled repayments. These are designed to compensate the lender for potential loss of interest income. However, many lenders don't charge this fee.

Early repayment fees

If you pay off your loan earlier than the agreed term, this fee may be charged. Like the extra repayment fee, it's intended to compensate the lender for potential loss of interest income.

Missed repayment fees

If you fail to repay a scheduled loan on time, the lender may charge a late payment or missed repayment fee. This fee serves as a penalty to encourage timely repayment.

Missed repayment fees are quite common for personal loans. While some lenders don’t charge late fees, it’s still important to prioritise making loan payments on time. If you think you won’t be able to meet your next repayment by the due date, contact your lender and let them know as soon as possible so you can work out an arrangement.

Documentation fees

You can often get charged a documentation fee when applying for a loan. This fee represents the cost of preparing your loan documents for your application, which include:

• Sufficient identification (e.g. driver’s licence, passport);
• Your bank statements;
• A current version of your credit report;
• Any other specific information based on what you are borrowing (e.g. a car loan will require registration details and vehicle details including the make and model).

While some lenders charge a documentation fee, many will encompass this fee into one application/establishment fee.

Encumbrance/REV check fees

If you're taking out a secured loan such as a car loan, the lender may charge a fee for checking the Register of Encumbered Vehicles (REVS) to ensure the asset (typically a car) isn't encumbered with debt already.

This is an important cost to verify because if the previous owner hasn’t paid off their car loan in full before selling to you, the lender could repossess the car from you if they default on their loan.

Most lenders don’t charge this fee, however. Plus, you can easily check the encumbrance status of a vehicle yourself for as little as $2 through the Personal Property Securities Register, so there’s no need to pay a lot of money for this fee.

Risk fees

Also known as a credit fee or risk margin, the risk fee covers the level of risk associated with your loan. Risk fees vary based on a number of factors, primarily your loan amount, credit score, financial history and more.

They could be a percentage of the loan amount or a flat fee, varying from $0 to several hundred dollars.

Early exit fees

Early exit fees were banned on personal loans with variable interest rates in 2011 but are still common with fixed-rate loans. Early exit fees are charged when a loan is paid off in full before the agreed term ends. They differ from early repayment fees as they are charged only once when the loan is fully paid off ahead of schedule. 

These costs can vary greatly from lender to lender depending on how much you had already paid off and how long the agreed loan term was.

Interest

In general, the most common and expensive charge you can expect on a personal loan is the interest charge. Interest is calculated as a percentage of the loan balance on a per-annum (annual) basis, the interest rate is essentially the cost of borrowing a lender’s money.

A difference in an interest rate can often save you hundreds if not thousands of dollars, and the rate you get is generally influenced by:

• Your credit score: Borrowers with higher credit scores are generally offered lower interest rates because they're seen as less risky to lenders.
• The loan amount and term: Larger or longer-term loans may have different interest rates than smaller or shorter-term loans.
• Whether the loan is secured or unsecured: Secured loans, backed by an asset like a car or home, often have lower interest rates than unsecured loans.

How much are the average personal loan fees?

Based on analysis by Savings.com.au, here are the average, minimum and maximum amounts you could expect to pay for some of the above fees.

Fee	Average	Minimum	Maximum
Establishment fee	$270	$0	$600 - $1,800
Annual fees	$1	$0	$110
Monthly fees	$2	$0	$15
Other ongoing fees	$5	$0	$400
Extra repayment fees	$10	$0	$25
Early repayment fees	$100	$0	$300
Missed repayment fees	$25	$0	$50
Documentation fees	$5	$0	$100
Encumbrance/REV check fees	$5	$0	$100

Remember these ranges are estimates only, and the fees can vary widely depending on the lender and your circumstances. Always check the fee schedule and the product disclosure statement (PDS) with the lender before taking out a personal loan.

What does the comparison rate mean?

The comparison rate allows you to understand the more accurate cost of taking out a loan. It is expressed as a percentage and includes the loan's interest rate plus certain key fees and charges associated with it.

Australian lenders are legally required to display the comparison rate alongside the advertised interest rate whenever an individual rate is shown. A comparison rate can make it easier to compare loans and services offered by lenders, help you choose the right one for your financial situation, and potentially save you hundreds of dollars in fees.

Remember: The loan with the lower interest rate might not necessarily be cheaper overall.

How to minimise personal loan fees

As you can see, personal loan fees can add hundreds (potentially thousands) to the overall cost of your loan if you’re not careful. Minimising personal loan fees requires a proactive approach on your behalf, but it’s very doable.

Here are several strategies you can use to reduce the cost of your personal loan.

Understand each fee and how it relates to your circumstances. Make sure you read all of the above on each fee so you know what each one means and how it could affect you. You now know to look for these when taking out a loan.

Research and compare a variety of loans. Different lenders have different fee structures; some won’t charge any fees for certain things while others will. Spend time comparing your options from multiple lenders. There are many online tools and websites that can help you compare personal loans based on your needs.

Look at the comparison rates. Comparison rates combine the interest rate and most fees into a single percentage. This makes it easier to compare different loans. However, they might not include every fee, so always double-check.

Read the fine print. Lenders often don’t have a list of all the fees they charge next to each loan: you’ll have to do some digging for that. But they should have a complete table of fees and charges on their websites somewhere.

Maintain timely repayments. Late payment fees can add up; avoid these by ensuring your payments are always on time.

Consider early repayments. If your financial situation allows, paying off your loan early can save you money in ongoing fees and interest, provided your loan doesn't have early repayment fees. But even then, the money you save overall could still be worth it.

Don't be afraid to negotiate with lenders. Some may be willing to waive or reduce certain fees, which can become more likely if you have a good credit history…

Improve your credit history. A strong credit history and positive recent financial behaviours can potentially reduce the fees charged on your loan and make you eligible for a ‘better’ loan.

Remember, while it's important to minimise fees and interest charges, you should also consider other factors such as the loan term, the flexibility of repayment options, the speed and convenience offered and the lender's customer service. 

Making an informed decision based on all of these can save you money and stress in the long run.

Read more:

What fees does Jacaranda Finance charge?

At Jacaranda, our loans include several of the fees listed above, mainly:

• Establishment fees
• Ongoing monthly fees
• Risk fees
• Missed payment fees

We do not charge any fees for extra or early loan repayments.

The interest rate, fees and charges applicable will vary based on which of our loan products you choose - the personal loan or car loan - and the loan amount and loan term you qualify for. These costs will also depend on your individual circumstances and the information verified during the loan application assessment.

Use our loan repayment estimate calculator to get a guide on what your repayments could be based on our fees and interest charges, or get in touch with our customer service team if you have any questions.

Why get a loan with Jacaranda Finance?

We’re an award-winning online lender specialising in providing fast, fair and flexible loans to the everyday Australian. Not only are our loans affordable based on your circumstances, they’re also seriously speedy.

We were one of the first lenders in Australia to provide a 60-second loan transfer to approved applicants³, while our state-of-the-art proprietary loan processing technology also means our customers can:

• Check if they qualify without affecting their credit score;
• Complete an application in just 5-12 minutes¹ depending on their circumstances, 
• Receive a same-day outcome on their application² if they apply during normal business hours

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The information on this website is for general information only. It should not be taken as constituting professional advice from the website owner - Jacaranda Finance. Jacaranda Finance is not a financial adviser, and the content on this page does not take into account your objectives, financial situation or needs. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.

Jacaranda Finance is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly by use of this website.

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