Personal loan fees: what to check before you borrow

The personal loan fees to look for

Not every loan charges every fee. Labels also vary. Look at the charge's trigger and amount rather than its name. MoneySmart recommends checking setup, ongoing, missed-payment and early-repayment costs alongside interest.

Upfront fees: the amount borrowed is not always the cash received

Suppose you need $20,000 and the establishment fee is $300. Ask how the lender collects it:

• Paid separately: you borrow and receive $20,000, then pay the $300 from your own money.
• Added to the loan: you receive $20,000 but start with a $20,300 balance. Interest can then accrue on the financed fee.
• Deducted from the advance: a $20,000 loan pays you $19,700. That may leave a shortfall for your purchase.

Compare quotes that provide the same usable funds. Otherwise, a cheaper-looking repayment might simply reflect receiving less money. ING's explanation of establishment fees illustrates why a fee added to the loan needs to be considered with the balance you repay.

Worked example: what $300 plus $10 a month really costs

This hypothetical loan provides $20,000 over three years at a fixed 9% p.a. The $300 establishment fee is paid separately and a $10 fee applies each month. There are 36 monthly payments, no balloon and no other charges.

The fees alone are $300 + ($10 × 36) = $660. They are not part of the $2,895.81 interest figure. The total paid also includes returning the original $20,000.

A smaller repayment can still mean a larger bill

Extend that same illustrative $20,000 loan from three to five years, keeping 9% interest, the separate $300 fee and $10 monthly charge:

The longer term reduces the monthly outgoing by about $220.83, but increases the total paid by $2,254.22. That is $240 in extra monthly fees plus about $2,014.22 in additional interest. Choose a repayment you can sustain, while checking the full cost of the term you select.

Early repayment: check the product, not just fixed or variable

Some fixed loans have break costs; others allow extra payments or early payout without a fee. A fixed rate alone does not tell you the exit rules. At our review, ING described no early or additional repayment fee, while ANZ's fixed personal loan disclosed possible early repayment costs. These examples show why the specific terms matter.

Ask separately about a small extra payment, a large lump sum and full payout. Before refinancing or closing an existing loan, request a dated payout figure and its expiry date. Check whether it includes accrued interest, any adjustment or exit fee, and the final account charge.

Then compare the cost of leaving with the future interest and fees you would avoid. If you refinance, include the replacement loan's setup costs too. A headline rate saving alone does not show the net saving.

Fee waivers, “no fees” and missing information

Treat a discount as conditional until you have checked who qualifies, which application channel counts and any application or funding deadline. A waived establishment fee does not automatically remove monthly or early-exit fees.

For example, CommBank's fixed-loan fee page distinguishes establishment and service charges from costs triggered in particular situations. Confirm current conditions rather than relying on an old screenshot or promotional headline.

Use three separate labels in your own comparison: confirmed $0, confirmed amount, and not confirmed. Record any conditions separately. Only the first establishes no charge for that item. An omitted fee leaves your total incomplete.

A comparison rate helps because it combines interest with most fees for an example loan. It does not capture every charge or your exact plans. ASIC identifies government and event-dependent charges among the exclusions.

The questions to send with your quote request

1. How much cash will I receive after deductions, and what will my starting balance be?
2. What interest rate applies to me, and can it change?
3. What is each repayment including ongoing fees? Are any fees collected separately?
4. What is the total amount payable over this term, including confirmed charges?
5. What could I pay for extra repayments, early payout, a missed payment or a failed direct debit?
6. Which discounts are conditional, and are those conditions recorded in my offer?
7. Are there broker, security or third-party costs outside the quoted lender fees?

Use the personal loan calculator with your interest rate and confirmed upfront and monthly fees. It assumes the upfront fee is paid separately and excludes conditional costs. For annual or differently timed charges, request a lender schedule rather than treating a rough monthly equivalent as an exact result.

If repayments are already difficult, contact your lender's hardship team early. MoneySmart explains hardship assistance and free financial counselling. Taking another loan just to cover existing fees can add to the problem.