Variable Interest Rate Personal Loans Explained

With variable interest rate personal loans, your interest rate may fluctuate across the term of your loan. Is a variable rate right for you? Should I apply for a fixed or variable rate loan? These are all questions you need answers for. Luckily, Monzi’s here to help. We aim to give you the tools you need to make an informed choice. 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 variable interest rate personal loan?

Just like any other loan, variable interest rate personal loans are lump sum cash amounts that can help you cover your immediate expenses while spreading the costs over time.

The difference, though, is in the personal loan rates. While most personal loans comes with fixed rates that remain constant over the course of your loan, variable rates may change (increase or decrease) depending on a range of economic forces, outside of your control. In other words, the current variable interest rate won’t necessarily be your interest rate in the future.

While the upside is that the rate may decrease thereby reducing your interest payment, by the same token, they can increase too. In that case, your interest payments would be greater.

While that covers what a variable rate is, there’s so much more to know. Read on and we’ll look at all the information you might need to know to decide if a variable interest rate is right for you. Let’s go.

What are the best variable interest rate?

In short, we are unable to say which rate is the best. After all, there is no standard variable interest rate. Instead, the rate you are offered may depend on your loan and financial situation.

To make this more clear, lenders may offer you a specific personal loan interest rate based on several factors including:

  • Your credit history: reliable borrowers with a good credit score may receive lower rates, given that they are more reliable borrowers.
  • Secured or unsecured loan: secured loans come with less risk for lenders. As a result, they often come with lower rates too.
  • Your loan amount: rates between small loans and large loans may vary.

However, this is just a guide of potential factors that may be considered. Ultimately, your lender will determine the rate that you are offered.

Variable interest rate comparison: comparing loans

Comparing loans is essential to ensuring you get the right loan for your circumstances. Moreover, it can potentially save you money.

However, if you’re new to borrowing, you’re probably wondering what you need to compare. Luckily, Monzi’s here. Check out our quick guide to comparing loans below:

  • Interest rate and fees: try to find the lowest variable interest rate and the fewest fees. That way, you can reduce your total cost.
  • Comparison rate: combines the rate and fees to give you an idea of the total loan cost. It’s the easiest way to compare loans from a cost perspective.
  • Fixed or variable rate?
  • Secured or unsecured?
  • How much can I borrow from this lender: do they only offer small loans or can you borrow up to $10,000?
  • Check each lender’s reviews to get an idea of how they’ve treated borrowers in the past.

Variable vs fixed rates: what’s the difference?

The difference is in the name.

With a fixed rate, your interest rate won’t change across your loan term. It doesn’t matter if you’re repaying it over one year, two years or ten years. It will always remain constant. As a result, you will always pay the same percentage of interest on your outstanding balance.

On the other hand, the variable interest rate definition is that your rate can and will change over your loan term. From the borrower’s perspective, changes can either be good or bad. In any case, the percentage of interest that you pay will fluctuate over your loan term.

Fixed vs variable interest rate: which is better for me?

In short, this is up to you. Each type has its benefits and drawbacks, meaning you must weigh up your options to determine which is right for you.

Obviously, if you prefer certainty and want to know exactly what your repayments will be then a fixed rate is for you. Your rate and repayments will remain the same across the course of your loan, allowing you to easily budget and account for your costs.

On the other hand, if you value the flexibility and potential benefits of a variable rate, then that will be the option you choose. Obviously, with a variable rate, you will be at the mercy of rate changes. If rates move in your favour, you will save money. However, if they don’t, you could find yourself paying additional interest. As a result, variable rates are much harder to budget for.

Learn more about fixed rate home loans here.

Can I pay off variable rate personal loans early?

Yes, usually.

However, before you do, ensure you consult your loan agreement. More often than not, lenders will charge an early exit fee if you opt to pay off your loan early. This number will be clearly outlined for you in your contract.

As a result, ensure you have the money saved to cover the outstanding balance of your loan as well as this additional fee.

Finally, if you are managing your repayments comfortably, there may be no reason to repay your loan early. Simply continue making your repayments and keep the additional funds in your savings or allocate them elsewhere.

Although, there’s no doubt that getting out of debt ASAP is hard to ignore.

What are the dangers of variable interest rate personal loans?

The obvious danger with a variable rate is just that: it’s variable.

If your rate goes up, whether slightly or substantially, you’ll find yourself paying much more interest than you otherwise would have with a fixed rate. This can, in turn, increase your repayments which may put a strain on your budget.

You must account for this if you decide to apply for a variable rate personal loan. In short, it’s a gamble. While with a fixed rate, you’ll know exactly what you have to pay, variable rates and their movements leave you open to favourable or unfavourable changes.

How often does a variable interest rate change?

Variable rates may change as frequently as monthly, although typically, changes will only occur a few times a year. These changes are based on various market forces and economic factors which may be difficult to calculate or anticipate.

Obviously, the longer the term of your loan, the more rate changes you will encounter. Take this into account when choosing between a fixed and variable rate loan.

Do variable rates ever go down?


Based on the underlying economic factors, your variable rate can go up or down. Obviously, you will be hoping that your rate goes down as that will reduce the amount of interest that you have to pay.

If over your loan term your interest rate sees more decreases than increases, it is possible that you can save yourself money. Obviously, this is the reason why you might consider a variable rate. On the flip side, however, as we’ve already mentioned, if these changes aren’t in your favour, you may find yourself struggling to meet your repayments.

Variable interest rate personal loan man standing on rocks ocean sunrise

Can you get a $3,000 loan?


Most lenders offering personal loans will provide you with the option of applying for loans ranging from $300 to $10,000. With this, repayment terms may range from 12 to 24 months (depending on your loan type).

Typically, $3,000 are designated as medium loans meaning they must be secured with an asset. This asset could be your car, boat or caravan and acts as a guarantee. If you fail to make your repayments, then the lender may take steps to repossess this asset and sell it to recover their losses.

Where can I get a $3,000 loan with bad credit?

These days there are an array of lenders who may be willing to consider bad credit applicants. However, whether they offer fixed or variable rates will be determined by their individual policies.

To determine your suitability for credit, lenders will not only look at your credit history but your financial situation too. By getting an idea of your budget (e.g. income and expenses), lenders can get an idea of what may be affordable for you.

If you’ve made a few mistakes in your past but have worked your way into a secure financial situation, then you may still be able to access the personal loans you need. However, always keep in mind that approval is not certain and will be based on the lender’s assessment.

What is the minimum salary required for a personal loan?

Lenders may have different requirements in regards to income and how that affects your eligibility. As a result, it’s difficult to provide a clear answer.

In any case, regardless of the amount, you must prove that you are earning some form of income to be considered for approval. In other words, you must show that you have the capacity to repay any money that you borrow.

Given this, while we cannot provide a clear answer, intuitively, you will need to be earning a sufficient salary to cover the costs of your loan along with your regular expenses.

How much would a $10,000 loan cost per month?

In short, we are unable to say. After all, it will depend on a number of factors including whether your rate is fixed or variable, your loan term and your interest rate.

Obviously, the longer your loan term (i.e. 24 months), the smaller your regular repayments will be. Similarly, the shorter your term (i.e. 13 months), the larger your repayments will be.

Ultimately, it’s up to you to ensure that your monthly costs are affordable and manageable. While a short repayment term may seem like a good idea to get out of debt quicker, you must be sure that the repayments fit your budget.

Variable rate personal loans calculator

Keen to know how much you will have to pay? Online personal loan calculators offered by a range of financial institutions can make it easy. Simply enter your loan details and you will receive an estimate of your repayments and total loan cost.

However, these figures will only be an estimate. After all, variable rates can change over the course of your loan. As a result, your total loan costs may change too.

Given this, simply use this information as a guide of the possible costs you may encounter.

Variable home loan interest rate

While variable rates may be offered on some personal loans, they’re much more common in the world of home loans.

Obviously, these loans are much larger. However, consider the same pros and cons to determine which option is right for you.

While a fixed rate will make it easier to budget for your repayments, the flexibility and potential benefits of a variable rate can be hard to ignore. In fact, studies have found that borrowers are more likely to pay less interest if they opt for a variable rate rather than a fixed rate loans.

However, this obviously comes with a degree of risk and will not always hold true. As a result, weigh up your options if you’re looking for a mortgage loan.

Does Monzi offer variable interest rate personal loans?


In fact, we don’t offer loans of any kind. As a lender-finder service, we simply aim to match borrowers with lenders in a quick and convenient fashion.

However, the lenders we work with will only offer fixed rate personal loans ranging from $300 to $10,000. As a result, do your own research for variable rate loans.

If you’re happy with a fixed rate though, submit an application with Monzi today. If you apply during business hours, we might be able to pair you with a lender in just 60 minutes.

We list the loans potentially available through our network in the table below:

Small personal loan$300 to $2,000Unsecured
Medium personal loan$2,100 to $4,600Secured
Large personal loan$5,000 to $10,000Secured

Apply today

Think a personal loan is right for you? Scroll up and begin your application now.

Alternatively, check out the MoneySmart page on personal loans.

Finally, check out our other helpful articles; from consumer loans to a line of credit.

Factor In


Two credit cards
Two credit cards

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.