Consumer Loan – Monzi’s Simple Breakdown

A consumer loan can fund the purchase of goods or services. Moreover, you can get the cash you need now and divide the cost over the coming months or years. Is this the right choice for you? What are the different types of personal finance? Read on for Monzi’s comprehensive guide. Let’s go!

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What is a consumer loan?

In short, this type of loan simply refers to any loan that is used to finance a specific purchase. For instance, car loans and home loans are both examples of these loans.

In terms of structure, these loans most commonly take the form of a traditional lump-sum payout. Let’s say you apply for a $10,000 car loan. You get that total cash sum now and then you must repay it via a series of even, regular repayments over the coming months or years.

And that’s all there is to it. Simple, right?

Consumer loan calculator

Get an estimate of your total loan costs and regular repayments with a loan calculator. Access these resources free online through a range of lenders and financial institutions. They’re easy to use and are a great first step to determine if a loan is affordable for you.

All you have to do is enter the key features of your loan. This may include your interest rate, loan amount and repayment term. Subsequently, the calculator will provide estimates of your repayments and loan costs.

Compare these figures to your budget to determine if they would suit your budget.

However, always remember that these figures are simply a guide. Actual repayments and loan costs will vary.

What determines my consumer loan interest rate?

All loans come with an interest rate. This rate then calculates your interest payment. Essentially, interest is the price you have to pay for borrowing money. In other words, you pay back the principal amount, as well as interest and other fees and charges.

Lenders consider a range of factors in calculating your interest rate. In other words, it’s not as simple as one size fits all. As a guide, lenders will typically look at the following:

  • Secured or unsecured: you’ll usually get a more competitive rate with a secured loan given there’s less risk for lenders.
  • Your credit history: if you’re a trustworthy borrower, then you may be offered a better interest rate.
  • Your loan amount: the rates offered on large loans may differ from those offered on small loans.

However, this is not a complete list. It is merely a guide to display possible factors that may be considered.

Online loan companies

With new lenders entering the market seemingly all the time, the availability of online loans has risen significantly. As a borrower, that’s great news. Now, you can shop around and compare lenders to potentially find the best deal for you. All it takes is a little bit of time and effort.

Best of all, these companies are generally 100% online. That means that you can apply from the comfort of your own home (or anywhere for that matter). There’s no paperwork or meetings required. In short, accessing finance online has never been easier.

The benefits of using an online credit provider may include:

  • fast outcomes
  • no physical paperwork
  • apply 24/7
  • apply from anywhere
  • convenient
  • range of options at your fingertips.

Are personal loans different?

Overall, personal and consumer credit loans are relatively similar. In fact, personal loans are simply one type of these loans.

As we’ve already mentioned, a consumer loan refers to a loan that is taken out to fund a specific purchase. It could be a car, a new phone or can even cover various services such as home renovations. As a result, if you apply for a personal loan, then it will likely be categorised as a consumer loan. After all, you are usually using those funds to finance a purchase.

In terms of structure, they are identical. You receive a lump sum of cash which you are then required to repay over a fixed time in a series of even, regular repayments.

Consumer finance examples

Credit comes in many different shapes and sizes. As a result, they can cover a wide range of potential expenses.

While not an extensive list, the most common examples include:

  • Mortgages
  • Credit cards
  • Car loans
  • Personal loans
  • Home equity lines of credit.

Consumer loan hot air balloons in sky man woman photography with sunrise

What are the benefits of consumer finance?

The benefit of consumer loans is that they can help you manage cash shortfalls or purchase items that would be unattainable otherwise.

In short, with a consumer loan, you can borrow the cash you need now while dividing the costs over the coming months or years. That way, you don’t need to sacrifice your savings. Just make your required repayments over your loan term and you might be debt-free before you know.

The other great benefit is how simple they are. Your costs are divided into a series of even repayments over a fixed period. As a result, you’ll know exactly what you’re required to pay.

Is consumer finance a bad idea?

We cannot say if these loans are a bad idea. This is because it may come down to how you manage your loan.

If you borrow responsibly (i.e. what you can afford to repay) and make all your repayments on time, then personal finance may be a handy option to fund a necessary purchase today. Obviously, though, that’s easy to say.

All too often, however, individuals manage their debt poorly. Late or missed repayments and even defaults can have long-lasting effects. The damage to your credit score can make it difficult to access credit in the future. Not only that, if it’s a secured loan, then you can potentially lose your car or whatever asset you have attached as security.

At the end of the day, all loans come with a degree of risk. As a result, it’s crucial to understand exactly what you’re getting into. Consider your financial situation and loan objectives to determine if the product is right for you.

Where can I source consumer finance?

Usually, you can access loans through banks, other financial institutions (e.g. credit unions) and online lenders.

Ultimately, the products offered by each will be relatively similar. However, they may vary in the amounts offered, fees charged and the interest rates applied. As a general rule, banks typically will offer the largest personal loans. Although this is not always the case.

If you choose to apply for a loan, compare the terms and products on offer from each lender. Whether you choose to apply with a bank or an online lender is largely irrelevant. What matters is that you only agree to a loan with favourable and affordable terms that work for you.

Is a mortgage a consumer loan?


A fixed-rate mortgage is one form that a consumer loan may take. Obviously, given the cost of buying a house, this will be the largest of these loans. Mortgages usually range well into the hundreds of thousands whereas other consumer finance products (e.g. car loans) usually won’t exceed the tens of thousands with most being under $10,000.

If you intend to apply for a mortgage, then do your research. These days, not only can you apply with a bank, but you could also apply with online mortgage lenders too. Consider your options to determine which product is right for you.

Is personal finance expensive?

The difference between the amount you repay and your principal amount will represent the total cost of borrowing money. As you’d expect, this difference is created by the interest and fees that you pay.

Given this, the easiest way to reduce the cost of your loan is to find the most competitive interest rate. That way, you can reduce your interest payments and maximising the amount you will repay on your principal. However, be wary of additional fees or charges.

If you would like to know your total loan cost before you apply, check the comparison rate. This figure combines your interest rate and fees to give you an idea of your total loan costs. Use it to compare loans side-by-side to help you find the best deal.

Comparing loans

Like with almost any product, comparing loans is an absolute must. Shopping around can not only save you money, it can also ensure your repayments are manageable and affordable too.

If you’re not sure where to begin, check out the quick list below. Assess each loan on these features to determine which might be best for you:

  • Interest rate and fees: minimise your interest payments with a lower interest rate. Moreover, try to minimise the number of fees that you pay.
  • Comparison rate: this is the easiest way to compare the total cost of two or more loans. It combines your interest rate and fees to give you a single figure that represents your annual loan costs.
  • Secured or unsecured?
  • How much can you borrow from the lender: do they only offer small loans or do they offer large loans too?
  • What repayment terms are on offer?
  • Who is the lender: check their licence and reviews to ensure they’re a lender you can trust.

For further loan comparison tips, MoneySmart provides a detailed and useful breakdown.

What is the best reason for a consumer loan?

When you apply, you’ll need to give your reason for applying. In short, the best reason to give is the truth. Realistically, it’s the only reason.

Some loans can only cover certain expenses. As a result, if your lender discovers that you’ve lied about your purpose, then there is a significant likelihood that your application will be denied. Moreover, it is a form of fraud and may inhibit your ability to access finance in the future.

As a result, always be honest and truthful in your application.

Personal loans through Monzi’s lender-finder service

While the differences are only minor, at Monzi, we work with lenders who offer personal loans. That means you might be able to access the cash you need to cover a range of expenses.

Simply apply today and we may be able to pair you with an available lender in just 60 minutes. Best of all, you can borrow cash amounts from $300 to $10,000 with repayment periods that may range from 12 to 24 months.

With no paperwork, fast outcomes and a 100% online service, Monzi might be an easy and convenient way to find lenders online. Repayment terms may vary between lenders.

Apply today.

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000


12 months (minimum)

12 months (maximum)


20% upfront establishment fee

+ 4% monthly fee


Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. The minimum and maximum loan term is 12 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Loan amount

$2,001 - $4,600


13 months (minimum)

24 months (maximum)


48% Annual Percentage Rate (APR)

67.41% Comparison Rate p.a.


Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principal Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Annual Percentage Rate (APR) for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000


13 months (minimum)

24 months (maximum)


21.24% Annual Percentage Rate (APR)

48% Comparison Rate p.a.


Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principal Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Annual Percentage Rate (APR) for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.