By Ela Matters Staff 
Need to borrow money quickly?
Fast personal loans have become one of the most popular ways Australians borrow money. If you need access to funds quickly, it can be tempting to simply apply with the first lender you find…
But are you better off with a fixed or variable rate?
This decision could be the difference between repaying your loan at a reasonable cost or being hit with much higher fees than expected.
The problem is, most people don’t really understand the difference between these two types of loans. This means they could be overpaying thousands of dollars just because they chose the “wrong” option.
In this guide, I’m going to outline everything you need to know about fixed vs variable rate quick personal loans so you can make an informed decision about which is best for you.
What You’ll Discover:
- Fixed Rate Quick Personal Loans Explained
- Variable Rate Quick Personal Loans Explained
- The Pros and Cons Of Each Loan Type
- How To Choose The Right Option For You
- Making Your Decision
- Wrapping Things Up
Fixed Rate Quick Personal Loans Explained
A fixed rate personal loan is pretty much what it says on the tin.
Your interest rate is fixed for the entire loan term. This means your repayments stay exactly the same from the first month right up until the last.
Why is this important to know?
Consistent repayments are super helpful when you have to get an instant cash loan without documents and want to know exactly what you need to budget for. You also don’t have to worry about repayments creeping up when interest rates rise.
On average in mid-2024, Australians paid 11.05% for a fixed rate personal loan.
Fixed rates are great if you prefer certainty and can’t really afford to have your repayments fluctuate. They’re also a good option for borrowers that want simple consistent repayments and don’t intend to make extra repayments.
The main thing to remember with fixed rate personal loans is the early repayment fees…
This is because most lenders charge fees if you want to pay off your loan early, refinance or break your loan. They call these “break fees” or “early repayment fees” and they can be a significant extra cost.
Variable Rate Quick Personal Loans Explained
Variable rate personal loans work in a slightly different way.
The interest rate can increase or decrease throughout the life of the loan. This means your repayments can go up or down too. The change in repayments can happen monthly or less frequently. It depends on your lender and what the Reserve Bank decides to do with the cash rate.
It’s kind of like this:
Variable rate loans give you more flexibility and options than fixed rates. For example, you’re usually able to make extra repayments without penalty. You may also have access to a redraw facility which allows you to access those extra repayments later if you need them.
From the data, we can see that variable rates were about 8.52% on average in mid-2024. This was actually lower than the average fixed rate at the time.
Variable rates are ideal when…
- You want the flexibility to pay off your loan quicker by making extra repayments.
- You anticipate that interest rates will fall in the future.
- You want access to extra repayment features like redraw.
- You’re happy to have some uncertainty in your budget.
But there is a downside to variable rates that most people miss…
Variable rates can actually work against you when the Reserve Bank raises the cash rate. Most lenders pass on increases in the cash rate to borrowers by increasing repayments. This can make your budgeting much harder. It’s also not fun.
The Pros and Cons Of Each Loan Type
Let’s break it down so it’s super easy to understand.
Benefits of Fixed Rate Loans:
- Easy budgeting — You know what you’ll pay each month.
- Protection from rate rises — If rates go up, you don’t have to worry.
- Peace of mind — No nasty repayment surprises.
Downsides of Fixed Rate Loans:
- Early repayment fees — They can be expensive to pay off your loan early.
- Don’t benefit from rate drops — You’re stuck paying the original rate.
- Less flexible — Can be harder to make extra repayments.
Benefits of Variable Rate Loans:
- Flexible — You can make extra repayments whenever you want.
- Benefit from rate drops — Lower rates mean lower repayments.
- No early repayment penalties — You can pay off your loan anytime.
Downsides of Variable Rate Loans:
- Unpredictable repayments — Budgeting is harder when rates change.
- Risk of rate rises — Repayments can increase unexpectedly.
- Potential for higher costs — If rates keep going up, you pay more.
Simple, right?
The key is to understand what matters most to you as a borrower. Is flexibility more important than certainty? Or would you rather pay more for a consistent repayment schedule?
How To Choose The Right Option For You
Deciding between fixed and variable rate personal loans is really not that hard.
Once you know what to look for, it’s pretty simple to choose the option that works best for you.
Ask yourself a few questions:
- How stable is your income? If you need to budget for a fixed repayment each month, fixed rates make sense. If you have irregular income or expect to receive bonuses, variable might be better.
- What is your risk tolerance? Can you handle some uncertainty with your repayments? Or do you prefer to know exactly what you’re paying?
- How long do you plan to keep the loan? If you’re going to repay your loan quickly, variable rates give you more flexibility without penalties. If you plan to keep the loan for longer, fixed rates are better.
Your credit score will affect the interest rate you get offered. Higher credit scores = lower rates on both fixed and variable loans.
Something else most people don’t know…
Some lenders offer “split loans” where you can have a portion fixed and a portion variable. This gives you the best of both worlds.
Making Your Decision
Ok, here is the bottom line…
Fixed rate quick personal loans offer certainty and stability. You know what you’re paying. You know what you’re getting. No surprises.
Variable rate quick personal loans offer options and flexibility. You can pay extra. You can benefit from rate drops. You have more freedom.
Neither option is necessarily better, just different. The right choice depends on your financial situation and risk tolerance.
Don’t rush this decision. Compare offers from different lenders and look at the fees, features and flexibility of each loan option.
Wrapping Things Up
Deciding between fixed and variable rate quick personal loans doesn’t need to be stressful. Both options are widely used and both can be the right choice depending on your circumstances.
Fixed rates offer stability and predictability. Variable rates offer flexibility and the potential for savings. It’s a matter of matching the right loan type to your financial situation.
Do your research. Compare your options. And most importantly — read the fine print and understand exactly what you’re signing up for before you commit to a loan.
A few hours of research now can save you thousands of dollars over the life of the loan.
That’s money in your pocket. And that is always a good thing.