Personal loans in Australia

• A. A loan secured against your family home only
• B. A fixed amount of money borrowed from a lender and repaid in regular instalments over an agreed period ✓
• C. A government grant that never needs to be repaid
• D. A credit card with a fixed spending limit that rolls over each month

Why: A personal loan provides a lump sum that you repay in regular instalments, usually monthly, over a set term, with interest and fees included in the repayments.

• A. Stamp duty
• B. Interest charged on the amount borrowed ✓
• C. Annual council rates
• D. Superannuation contributions

Why: Interest is the main cost of borrowing. It is usually charged as an annual percentage rate (p.a.) on the outstanding balance, and it is what makes the total repaid greater than the amount originally borrowed.

• A. The lender must approve the loan within 24 hours
• B. The loan is backed by an asset, such as a car, that the lender can take if repayments are not made ✓
• C. The borrower has insurance that covers all repayments
• D. The interest rate is fixed for the life of the loan

Why: A secured loan uses an asset as collateral. Secured loans often have lower interest rates than unsecured loans, but the borrower risks losing the asset if they default.

• A. Only check the applicant's employment history
• B. Make reasonable enquiries about the borrower's capacity to repay without substantial hardship ✓
• C. Require the borrower to own property
• D. Guarantee the loan will be approved by a bank

Why: The responsible lending obligations under the National Consumer Credit Protection Act require lenders to assess whether the borrower can afford the repayments without substantial financial hardship, protecting consumers from unaffordable debt.

• A. The lowest possible interest rate the lender offers
• B. The true cost of the loan including interest and most fees, expressed as a single percentage ✓
• C. The rate of inflation over the loan term
• D. The interest rate charged by the Reserve Bank of Australia

Why: The comparison rate combines the advertised interest rate with most applicable fees and charges over a standard loan example, helping consumers compare the overall cost of different loans more accurately.

• A. A line of credit
• B. A term loan ✓
• C. A credit card cash advance
• D. A payday loan

Why: A term loan provides a lump sum that is repaid in fixed instalments over an agreed period, usually with a fixed interest rate, which makes budgeting predictable.

• A. You receive a single lump sum that must be repaid in equal instalments
• B. You can borrow, repay, and borrow again up to an approved limit ✓
• C. It can only be used to buy a specific item such as a car
• D. It requires no credit check or income assessment

Why: A line of credit gives you access to funds up to an approved limit. You only pay interest on the amount you use, and repaid funds can be redrawn.

• A. An unsecured loan based only on your income
• B. A loan backed by an asset such as a car or savings account ✓
• C. A loan from a buy now, pay later provider
• D. A credit card with no annual fee

Why: A secured loan uses an asset as collateral, such as a car or savings, which the lender can claim if repayments are not made. This often results in lower interest rates than unsecured loans.

• A. A loan that is only available from car dealerships at zero interest
• B. A secured loan used to purchase a vehicle, with the vehicle usually serving as security ✓
• C. A lease that you never own at the end of the term
• D. A government grant to help with vehicle running costs

Why: A car loan is typically a secured personal loan where the vehicle being purchased acts as security for the debt, which is why these loans often have lower rates than unsecured personal loans.

• A. A loan that combines several existing debts into one loan, ideally with a single repayment ✓
• B. A loan used only to pay off a home mortgage
• C. A loan that automatically increases your credit limit on all cards
• D. A short-term loan due on your next pay day with a very high fee

Why: A debt consolidation loan pays out your other debts and leaves you with one repayment, which can simplify budgeting and may reduce the overall interest rate if the new loan is cheaper.

• A. Centrelink
• B. Equifax Australia ✓
• C. The Australian Taxation Office
• D. ASIC Registry

Why: Equifax is one of the main credit reporting bodies in Australia, alongside Experian and illion, and lenders commonly check these reports when assessing a personal loan application.

• A. Your income level only
• B. How likely you are to repay debts on time, based on your credit history ✓
• C. The interest rate you must pay on existing loans
• D. Your employment length with your current employer

Why: A credit score summarises your credit history, including repayment behaviour, outstanding debts and credit enquiries, to estimate the risk of lending to you.

• A. A current gym membership card
• B. A driver's licence or passport ✓
• C. A library card
• D. A utility bill from a previous address only

Why: Lenders must verify identity under anti-money laundering rules, and a driver's licence or passport is commonly accepted as primary identification.

• A. To determine your astrological compatibility with the loan
• B. To assess whether you can afford the repayments without financial hardship ✓
• C. To calculate the tax you owe on the loan
• D. To decide which bank branch you should visit

Why: Responsible lending obligations require lenders to assess a borrower's ability to repay, which depends heavily on existing debts, living costs and income.

• A. Having a stable job with consistent income
• B. Having multiple recent loan applications and missed repayments ✓
• C. Maintaining a long history of paying bills on time
• D. Holding a savings account with regular deposits

Why: Multiple recent applications and missed repayments signal higher risk to lenders, as they may suggest financial stress or over-reliance on credit.

• A. Calculate the exact monthly repayment amount without any other information
• B. Compare the true cost of different loans by including most fees alongside the interest rate ✓
• C. Determine whether the lender is licensed by ASIC
• D. Find out the maximum amount you are allowed to borrow

Why: The comparison rate combines the advertised interest rate with most mandatory fees and charges, expressed as a yearly percentage. This gives a more complete picture of the total cost, making it easier to compare loans from different lenders on a like-for-like basis.

• A. Application fee paid once when you apply
• B. Early exit fee charged if you pay the loan off ahead of schedule
• C. Monthly account keeping fee charged throughout the loan term ✓
• D. Dishonour fee charged when a repayment fails

Why: A monthly account keeping fee is charged repeatedly over the life of the loan, so it is an ongoing fee. Application fees are one-off, early exit fees apply only when you repay early, and dishonour fees apply only when a payment fails.

• A. A fixed rate changes with the Reserve Bank cash rate, while a variable rate never changes
• B. A fixed rate stays the same for an agreed period, while a variable rate can change over the loan term ✓
• C. A fixed rate applies only to secured loans, while variable rates apply only to unsecured loans
• D. A fixed rate is always lower than a variable rate in every situation

Why: A fixed rate is locked in for an agreed period so your repayments stay predictable. A variable rate can rise or fall over the loan term, usually in response to changes in market conditions or the lender's pricing, which means repayments can change too.

• A. $1,000
• B. $2,000 ✓
• C. $10,000
• D. $20,000

Why: With a flat rate, interest is calculated on the original principal each year. 10% of $10,000 is $1,000 per year, so over 2 years the total interest is $2,000. A reducing balance loan would charge less, since interest falls as the principal is repaid.

• A. Fees are always waived if you make every repayment on time
• B. Some fees, such as late payment or early exit fees, can add significant cost and are not always obvious from the headline interest rate ✓
• C. Lenders are required to charge the same fees regardless of the loan amount
• D. Fees only apply to loans taken out through a bank branch

Why: A low advertised interest rate can be offset by fees such as late payment, early repayment, or account keeping charges. Reviewing the fee schedule helps you understand the total cost and avoid unexpected expenses over the life of the loan.

• A. The advertised interest rate only
• B. The comparison rate ✓
• C. The monthly repayment amount only
• D. The loan's establishment fee only

Why: The comparison rate is required under Australian consumer credit rules and combines the interest rate with most mandatory fees, giving a more complete picture of the total cost of borrowing. It allows fairer comparisons between lenders than the interest rate alone.

• A. A one-off application fee charged at settlement
• B. A monthly account-keeping fee ✓
• C. A early repayment fee charged only if you pay out the loan early
• D. A dishonour fee charged after a failed payment

Why: A monthly account-keeping fee is charged repeatedly over the life of the loan, so it adds significantly to the total cost. Application and early repayment fees are typically one-off, and dishonour fees only apply when a payment fails.

• A. Lower repayments always mean a higher interest rate
• B. A longer loan term can mean paying more interest overall, even with smaller repayments ✓
• C. Lower repayments are only available on secured loans
• D. Lenders are legally required to charge the same total cost

Why: Stretching a loan over a longer term reduces each repayment but means interest accrues for more months, often increasing the total amount paid. Always compare the total repayable amount, not just the monthly figure.

• A. Only the lender's logo and advertising
• B. The loan amount, term, interest rate, comparison rate, and all fees listed in the Key Facts Sheet ✓
• C. Whether the lender offers a free gift with the loan
• D. How quickly the lender can approve the application

Why: The Key Facts Sheet sets out the key terms and costs in a standard format. Comparing the same loan amount and term across lenders, using the comparison rate and all listed fees, gives you a like-for-like comparison.

• A. Accept the first offer you receive to save time
• B. Choose the lender with the largest advertising budget
• C. Compare several offers using the same loan amount and term, then assess total cost and suitability ✓
• D. Select the offer with the lowest application fee regardless of other costs

Why: Comparing several offers on the same basis, looking at total repayable amount, comparison rate and all fees, helps you find the genuinely cheapest and most suitable loan. Focusing on a single cost element can lead to a more expensive overall deal.

• A. A library card
• B. An Australian driver's licence or passport ✓
• C. A gym membership card
• D. A utility bill from over five years ago

Why: Lenders must verify identity under anti-money laundering rules, and an Australian driver's licence or passport are widely accepted primary forms of photo identification.

• A. Your favourite television show
• B. Your income, existing debts, and expenses ✓
• C. The colour of your car
• D. How many social media followers you have

Why: Lenders assess serviceability by comparing your income against your existing debts and living expenses to judge whether you can comfortably meet repayments.

• A. A summary of your school grades
• B. A record of your credit history, including repayments and defaults ✓
• C. A savings account statement
• D. A receipt for a recent purchase

Why: A credit report, held by agencies such as Equifax, Experian, and illion, records your borrowing history, repayment behaviour, and any defaults, which lenders use to assess risk.

• A. The comparison rate is always lower than the interest rate
• B. The comparison rate includes most fees and charges, giving a truer cost of the loan ✓
• C. The comparison rate is set by the government for every loan
• D. The comparison rate only applies to home loans

Why: The comparison rate in Australia incorporates most fees and charges over a standard loan term, so it gives a more accurate picture of total borrowing cost than the headline interest rate alone.

• A. Applying to many lenders at the same time without checking eligibility
• B. Paying existing bills on time and reducing outstanding debts before applying ✓
• C. Hiding existing loans from the lender
• D. Requesting the largest possible loan amount

Why: On-time bill payments and lower existing debt signal responsible financial management, strengthening your application. Multiple applications can hurt your credit score, and hiding debts is misleading and can lead to rejection.

• A. Borrowing the maximum amount the lender offers
• B. Creating a budget that shows your income and all regular expenses before taking out the loan
• C. Taking out a second loan to pay off the first
• D. Ignoring the loan terms once the funds are deposited

• A. Your credit score will always increase
• B. You will pay less interest over the life of the loan
• C. The loan may take much longer to repay and you may pay substantially more interest overall
• D. The lender will automatically forgive the remaining balance

• A. Making repayments on time each month
• B. Using new loans or credit to make repayments on existing debts
• C. Keeping a record of all loan statements
• D. Comparing interest rates before applying

• A. Stop communicating with the lender until the situation improves
• B. Contact your lender early to discuss options such as a hardship arrangement
• C. Apply for another loan from a different lender
• D. Wait until a default notice is issued before taking any action

• A. It removes the need to ever review your loan statements
• B. It reduces the total amount you have to repay
• C. It helps ensure repayments are made on time, avoiding late fees and damage to your credit history
• D. It guarantees the lender will lower your interest rate