Negative Interest Rates – How Might They Affect You?

As the pandemic maintains a grip on Australia, many people are beginning to worry about the possibility of negative interest rates. Throughout the pandemic, interest rates have been at the forefront of the financial mind. But what are negative interest rates? And could they affect you?

Interest rates, whether positive or negative, apply to many things. From no credit check loans to mortgages. Therefore, it’s vital to consider how they impact your financial wellbeing and your future. This is Monzi’s beginner guide to negative interest rates and interest rates in general.

Please note that specific ideas and products presented in this article may not be on offer by Monzi or 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 are negative interest rates?

If the interest rate set by central banks falls below 0%, society may face negative rates. In most cases, negative rates are highly unideal. These rates have notably occurred during the global financial crisis. Therefore, it makes sense that governments globally have been working to maintain the interest rates. Especially as the world moves in and out of lockdown.

The potential of this kind of interest has governments and banks looking to increase lending and foster growth. In Australia, negative interest rates are very rare. However, in other countries, they can be common. For now, Australia is safe from these kinds of rates. Regardless, it is vital to understand how interest rates of all kinds can affect you. This article will explore the different types of interest. It may also help you get the best value for your money.

Can interest rates be negative?

Yes, interest rates can be harmful. Typically these rates are implemented to help a slow economy. A central bank may take steps to decrease the rates to promote involvement in the economy. Particularly when situations such as the pandemic have increased unemployment and spending on the consumer’s behalf. Whilst this can jump-start the economy, it won’t benefit the banks. Therefore, the central bank does their best to avoid needing to take these measures.

Australia’s central bank is the Reserve Bank of Australia (RBA). The RBA is highly unlikely to apply negative rates to typical consumer products such as mortgage loans and savings accounts. Instead, negative rates are likely to apply to the economy as a whole. However, this doesn’t mean you can ignore the outcomes of negative rates as a citizen.

Can nominal interest rates be negative?

The nominal interest rate is the percentage you pay a lender for borrowing money. However, the nominal rate is unadjusted for inflation. Therefore, this introduces the real interest rate, which accounts for inflation. Negative nominal rates are possible yet unlikely. particularly, in Australia where the RBA is uninterested in letting the rates fall below 0%.

How does a negative interest rate work?

Did you know that the big banks aren’t at the top of the food chain? Commercial Australian banks, the ones you choose to bank with, have accounts with the RBA. Just as you receive interest on your bank account, so do commercial banks with their RBA accounts. If the interest rates for these accounts fall below zero, commercial banks will have to begin paying interest to the RBA. In turn, the banks have the option to withdraw any cash reserves they may have with the RBA. This encourages the banks to start lending to their customers, thereby helping to stimulate the economy.

However, if this cash rate falls too far, it could also drag down consumer interest rates. This can cause weird scenarios, such as consumers needing to pay the bank to deposit their money. Negative interest rates could also potentially strain the profit margins for banks, creating hesitancy when it comes to lending. So, whilst there is potential for low rates to help the economy, it may hinder the economy instead if it goes too far. Therefore, negative interest rates cannot simply be an easy escape route, and the government should work hard to avoid a position where this may be necessary, in the first place.

How do negative interest rates affect mortgages?

Firstly, Australia has never had to introduce negative interest rates on home loans. Therefore, it may be challenging to gauge precisely what effect this may have. Negative interest rates on mortgages can be pretty enticing to the consumer, however. This is as, by the time you finish repaying your loan, you will have likely repaid less than you borrowed. This depends on whether your loan is fixed or variable and the length of time it took you to repay it.

While this is great for the borrower, as you essentially get paid to borrow, it is not suitable for the bank or the economy. The RBA has displayed a bias against possible negative interest rates on home loans in Australia. Therefore, it is unlikely to happen, yet not impossible.

How do negative interest rates affect the economy?

Firstly, lowering the interest rate can present positive effects for the economy in some capacity. This may encourage consumers to start borrowing more, spending more money, and possibly offer a knock-on effect that lowers unemployment. However, there is typically a sweet spot for this. The RBA can overshoot if they aren’t careful with how they manage it.

It can be a difficult concept to grasp if you are new to the idea of interest rates in general. Typically, the actions of the RBA and the government are beyond the public’s control. However, note that while interest rates can go negative, the central bank will work to avoid this in most circumstances. Whilst there is uncertainty in the air regarding the pandemic and the future of Australia’s financial sector, there are ways the government can manage it.

How could negative interest rates affect you?

There are pros and cons when it comes to how negative interest rates may impact you as an individual. For example, if you are looking to borrow money during this period where rates go negative, you may be taking the cheapest version of a loan you possibly can. However, if you seek to deposit money into the bank, negative interest rates could see you losing money in the long run. This is as you would be paying the bank to hold your money, rather than earning interest on it.

A chain reaction from this may also mean that pensioners might be at risk. If you are a senior citizen that relies on the money deposited in the bank to get you by, your life savings could take a hit. If you are worried about the future and what the continuing effects of the pandemic might mean for you, consider speaking with a financial advisor. Don’t hastily begin withdrawing your money and recklessly investing it. There are ways to combat negative rates, and speaking with a professional may be highly beneficial.

Are negative rates sustainable?

It’s hard to confirm or deny the long-running impact negative rates may have on Australia. However, they are unlikely to be a sustainable option for the future. Lowering the rate is often done to inject a short boost into the economy. With the goal of encouraging citizens to engage with various goods and services they may not have previously been able to afford.

However, it may be fair to say that if it isn’t general knowledge these rates won’t serve their purpose of generating the desired outcome. Therefore, these altercations to the interest rates might not be sustainable in the long term. Instead, it’s worth working on getting the economy back on track in times of hardship.

What do interest rates affect?

Interest rates, regardless of whether negative or positive, apply to several financial services. From same day loans to home loans and credit cards to savings accounts. Interest can work for or against you, depending on what you want to do with your money.

When interest rates are positive, if you are looking to borrow money (unless you are taking a no-interest loan), the interest will be the extra amount you repay on top of your loan. The same goes for credit cards, which can be very high interest and cost you far more than you might’ve paid if you used cash. Whereas, if you are looking to deposit your money into a high-interest savings account, you will likely earn more off of this cash. Depending on the financial endeavour you are undertaking, interest rates will mean different things to you.

If you are borrowing, you may get some say over the kind of interest rate you choose. Meaning that you may have the choice of a variable interest rate or a fixed interest rate. Where variable moves with the market and can get either better or worse. Fixed stays at the rate it was at when you applied for the loan. Although, these may not last for the loan’s duration.

How to survive negative interest rates?

If you are a pensioner or think that you could lose money if you have it deposited in the bank, you may seek ways to protect your cash. This is not Monzi’s area of expertise, and you may be better off speaking to a financial advisor about such a topic. However, you should know that negative interest rates aren’t the end of the world, despite the general panic they cause the government.

It may be wise to avoid jumping straight into panic mode and taking whatever advice you encounter online. There is plenty of help available, and it is also important to note that negative rates rarely affect the consumer.

Negative Interest Rates

Alternatives to negative rates

It’s hard to say what the alternatives to negative interest rates are, considering we’re just your local lender-finder and not economists or the RBA. However, without the potential economic jump-start lowering the interest rates might bring, it’s fair to assume that the social state of society would also witness a decline. With high rates of unemployment and a lack of extra cash to compensate, society could flatline in terms of productivity.

Even though you are unlikely to encounter negative interest rates personally if you want to know what alternatives exist, there is plenty of information freely available online. Or you could consider speaking to a financial advisor. If you fear that you won’t be able to keep your head above water in future, the government’s MoneySmart site has an excellent page on urgent help with money. This may help you feel calmer and understand where you can turn in tight situations.

Interest rates for personal loans

When it comes to the regular personal loan interest rates, there can be some variance. Depending on whether you take a financial institution’s personal loan or a private lender’s private loan, you are likely to see some margin of difference. Generally speaking, the interest rate that accompanies most personal loans is higher than the interest rate of other loan types. This is due to the repayment terms that accompany personal loans. There is usually such a short turnaround with personal loans in comparison to large loans. Hence, the interest rate is higher to protect your lender.

A bank loan may be able to offer lower interest rates. This is as they can have more stability in their offers. At the same time, private loans compensate for their higher rates with more flexibility regarding assessment criteria. This means that if you have bad credit but are confident you can stay on top of your repayments, private personal loans may work well for you.

What interest rates are on different loan types?

Knowing that personal loans typically have high interest rates, what rates apply to other loan types? Normally, the shorter the loan term, the higher the rate. Having said this, the rates that apply to your card are likely to be some of the highest rates on the market. Unless you have no interest credit cards. Many people don’t outrightly consider credit cards as loans, yet by definition, they are.

If you are taking a loan with a longer-term, such as a mortgage loan or a business loan, it may be more appropriate to expect a lower interest rate. Particularly with mortgage loans, considering you could have a term of up to 30 years. Even with a low rate, you could still end up paying a significant portion of interest by the time you repay the loan.

Can you prepare for these rates?

There may be some ways to prepare for negative interest rates. However, the question then becomes, do you need to? If you are just a regular consumer of your bank’s services, it is unlikely that negative interest rates will have much effect on you at all. You have the option of beginning to diversify your portfolio and spreading your assets out so that if rates do go negative, you won’t be paying the bank to hold your money.

However, there has been significant volatility in the stock market and amongst cryptocurrency investing lately. If you don’t have much experience in the investing scene, diving headfirst may not be best. If you have been contemplating this, consider speaking with a financial advisor or an investment broker for further information.

What rates can you expect with Monzi?

There is a range of lenders within the Monzi network. Therefore we cannot say what the terms of your loan will look like. Each lender operates differently, as the majority of the lenders in our network are private lenders. However, We do understand that you may want a visual representation of what your potential loan could look like.

Hence, on our home page, you can find examples for small, medium and large loans. This tool will give you an estimation for each category of possible loan amounts, terms, and costs. It also offers you an example that does the maths on what your loan may work out to be. Keep in mind that this should to only be used as a guide, not as a gospel. If you successfully match with a lender, they will contact you to discuss the legitimate terms, costs and amounts.

Please note that Monzi is only a lender-finder, not a lender. Therefore we cannot give you any further information about how your loan might look. Refer to our home page for full details of these examples.

Does credit score impact interest rates?

No, your credit score won’t influence the rate listed on the loan you are applying for. Whatever rate is set by your lender is what you will need to pay. However, this may require you to search for bad credit loans if your credit is somewhat shabby. Thereby pushing you into the loan categories that require a higher interest rate.

While this may initially seem unfair, you are a higher perceived risk to your lender. If you apply for a loan with stricter criteria, you may first have to do some credit repair Australia. Repairing your credit score will mainly require time; however, the number of options available to you will increase once you manage to conduct these repairs.

Can you get a loan with bad credit?

You can get a loan with bad credit if you are searching in the correct places. Financial institutions typically have firm criteria and will not make exceptions for bad credit. However, if you turn to private lenders, you may receive more compassion for your application.

The lenders in the Monzi network understand that you aren’t the sum of the mistakes listed on your credit report. Hence, they may be more willing to provide you with the second chance that you’ve been chasing. If you can show that you have had a regular income and meet the eligibility, why not see how Monzi can help you?

Can you get a loan while on Centrelink?

In most circumstances, getting a loan while receiving Centrelink payments can be pretty tricky. This is as it can be hard to show that you have funds to maintain yourself, along with repaying a loan, simultaneously. However, just because you receive government payments doesn’t mean you deserve to have your application skipped.

If you apply for loans for people on Centrelink with Monzi, it is possible to receive approval. Our lenders will have to first determine that you have the necessary borrowing power. Depending on your lender’s terms, you may have to show that government payments don’t make up more than half of your income. However, this isn’t always the case. If you are chasing small loans to help you get through a tight spot, why not consider applying?

Pros and cons of negative interest rates

Almost everything in life comes with advantages and disadvantages. This is even more relevant when it comes to financial matters. However, it can be pretty challenging to weigh this on an economic scale. There are only a few pros and cons of negative interest rates that may be relevant to the average Aussie. Positively, if you are looking to buy a house or to refinance, negative interest rates would make it the perfect time to take these tasks on.

Although, if you are a retiree or rely on the interest generated via savings accounts, negative interest rates won’t help your situation. However, as it is less likely that Aussies will encounter negative interest rates. You may not need to spend time obsessing over the possibility of further negative cash rates.

Interest rate calculators

There are many calculator tools available online that may help. You can use these if you are unsure about how interest rates might affect your loan. You can very easily find a credit card interest calculator or a principal and interest loan calculator.

Not only this, but you can also access loan comparison tools online. Regardless of the type of loan you are looking for, there should be a loan comparison tool. The tools can give you side by side comparisons for some of the best loans on the market. However, the majority of the loan options in the tool will be from financial institutions. Meaning that if you are looking for private lenders, you may be better off using a lender-finder, such as Monzi’s.

Can you get a loan while unemployed?

There is also the possibility to attain loans for unemployed. Monzi lenders may be willing to consider your application. However, you will need to prove that you have been receiving a consistent income for the past three months. This may only work if you have been recently unemployed. However, one of the lenders in the Monzi network may take the time to consider your application and whether or not they can help you.

Before you choose this option, ensure you have looked elsewhere for any other help that you may be able to take. A loan shouldn’t be your first option when money is tight.

Monzi and negative interest rates

You won’t have to worry about negative rates when you apply through Monzi. If you are looking for some examples of your interest rate, you can visit our home page. However, if you are ready to apply for a loan, you can get started with the Monzi lender-finder. To start, simply click the purple ‘apply now’ button or scroll up to our loan slider at the top of the page.

However, don’t start applying if you still have questions. You can direct any queries you may have to our email Our friendly team will do their best to promptly answer your questions and help you complete your application. Then, if you apply within business hours, we may find you a lender in as little as 60 minutes. So, if you don’t have any further questions and are ready to get started, it couldn’t be easier.

Check us out on social media!

Have you completed a loan? Are you looking for more informative articles? You can find Monzi on multiple social media platforms. Why not check out our Facebook, Instagram, Twitter and Pinterest accounts? There you will find all Monzi’s updates and new articles. And, if you hate sending emails, you can always send your questions to our social media direct message boxes.

We look forward to seeing you there!

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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


Representative example based on a loan of $1000 over 6 months a borrower can expect to pay a total of $1440.

Disclaimer: Under the current legislation, all Small Amount Credit Contract loan providers don’t charge an annual interest rate. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The comparison rate on loans between $300 and $2000 could be up to 199.43%. The minimum loan term is 16 days and maximum loan term is 12 months. Representative example based on a loan of $1000 over 6 months a borrower can expect to pay a total of $1440. WARNING: This comparison rate is valid 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.

Loan amount

$2,100 - $4,600


13 months (minimum)

24 months (maximum)


47.8% Annual Percentage Rate (APR)

65.85% Comparison Rate p.a.


Representative example based on a loan of $2500 over 24 months a borrower can expect to pay a total of $4,556.88.

The maximum interest rate for a Medium Amount Credit Contract is 47.8%. Comparison Rate 65.85% p.a. The maximum loan term is 24 months. Representative example based on a loan of $2500 over 24 months a borrower can expect to pay a total of $4,556.88. WARNING: This comparison rate is valid 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. Credit criteria and terms and conditions apply.

Loan amount

$5,000 - $15,000


13 months (minimum)

24 months (maximum)


17% Annual Percentage Rate (APR)

36% Comparison Rate p.a.


Representative example based on a loan of $10,000 over 36 months a borrower can expect to pay a total of $16,489.

The starting interest rate for a Personal Loan is 17%. Comparison Rate 36% p.a. The maximum loan term is 24 months. Representative example based on a loan of $10,000 over 36 months a borrower can expect to pay a total of $16,489. WARNING: This comparison rate is valid 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. Credit criteria and terms and conditions apply.