Personal Loan Glossary

Plain-English definitions, no jargon. 48 terms.

APR (Annual Percentage Rate)

The yearly cost of a loan expressed as a percentage. In Australia the comparison rate plays this role for consumer loans by folding in the interest rate plus standard fees.Learn more →

BNPL (Buy Now Pay Later)

Services like Afterpay, Zip, and Klarna. The repayments are counted in serviceability, and heavy BNPL use on your statements can concern lenders.Learn more →

Break Fee

A charge some fixed-rate loans apply if you repay early or refinance before the term ends. It is not included in the comparison rate, so check for it separately.

Casual Employment

Work with no guaranteed hours. Lenders typically want to see 6–12 months in the same role before treating casual income as stable.Learn more →

Comparison Rate

A single percentage that combines the interest rate with most standard fees, so you can compare loans on a like-for-like basis. Australian lenders must display it wherever they advertise a rate.Learn more →

Comprehensive Credit Reporting (CCR)

The Australian system, in place since 2014, where your credit file records positive behaviour like on-time repayments — not just defaults and missed payments.Learn more →

Consumer Credit Insurance

Optional insurance sold with a loan to cover repayments if you cannot work due to illness, injury, or job loss. It is optional — never a condition of approval.

Credit Bureau

A credit reporting body that collects your credit history and produces your score. Australia has three: Equifax, Experian, and illion.Learn more →

Credit Card Limit

The maximum you can spend on a card. Lenders count roughly 3% of the total limit per month as a commitment — even if your balance is zero.Learn more →

Credit File

The record a bureau holds on you — your accounts, credit limits, repayment history, enquiries, and any defaults. Also called a credit report.Learn more →

Credit Score

A single number summarising your credit history that lenders use to gauge risk. Higher generally means lower risk. It is a guide, not the whole decision.Learn more →

DTI (Debt-to-Income Ratio)

Your total monthly debt repayments divided by your gross monthly income, as a percentage. Most lenders prefer it below 50%.Learn more →

Debt Consolidation

Combining several debts into a single loan with one repayment. It can simplify your finances and lower interest, but only if the new rate is genuinely better.Learn more →

Default

A debt of $150 or more that was overdue by 60+ days and listed on your credit file. Defaults stay on file for years and are a common reason for decline.Learn more →

Dependants

People who rely on you financially, usually children. Each dependant increases your assessed living expenses and reduces borrowing capacity.

Equifax Score

Australia's most widely used consumer credit score for personal loans, ranging from 0 to 1,200. Higher is better. You can check yours for free at equifax.com.au.Learn more →

Establishment Fee

A one-off, upfront fee some lenders charge to set up a loan (also called an application fee). It is included in the comparison rate.

Experian

One of the three Australian credit bureaus, using a 0–1,000 scale. Some lenders check Experian instead of, or alongside, Equifax.

Fixed Rate

An interest rate locked in for the life of the loan, so your repayments never change. Predictable, but you will not benefit if market rates fall.

Gross Income

Your total income before tax and deductions. Lenders start here, then convert it to a net figure to assess what you can afford.

Guarantor

Someone who agrees to repay your loan if you cannot. A guarantor takes on real legal risk, so it is a serious commitment for them.

HEM (Household Expenditure Measure)

A benchmark lenders use to estimate your living costs based on income, location, and dependants, when they assess affordability.

Hard Enquiry

The mark left on your credit file when you apply for credit and a lender checks you. Several in a short period signal financial stress and can lower your score.

Homeowner

Someone who owns property, with or without a mortgage. Homeowners are often offered lower personal loan rates than non-homeowners.

Interest Rate

The percentage a lender charges on the money you borrow, shown per year. It does not include fees — for the true cost, look at the comparison rate.Learn more →

Liability

Anything you owe that carries a repayment or limit — loans, credit cards, BNPL, car finance. Liabilities reduce how much you can borrow.Learn more →

Living Expenses

Your regular household spending — groceries, utilities, transport, insurance. Lenders use the higher of your declared expenses or the HEM benchmark.

Loan Term

The length of time you have to repay a loan, usually stated in years. A longer term lowers each repayment but increases the total interest you pay.

National Credit Code

The law governing consumer lending in Australia, part of the NCCP Act. It requires responsible lending and mandates the comparison rate in advertising.

Net Income

Your income after tax and Medicare — the money that actually lands in your account. Serviceability is calculated from this figure.

No Interest Loan (NILS)

A small loan for essential goods and services with no interest and no fees, for eligible people on low incomes. Delivered by Good Shepherd and community providers.Learn more →

PAYG (Pay As You Go)

An employee whose tax is withheld by their employer. PAYG full-time workers usually have the most straightforward path to approval.

Paid Default

A default that has since been repaid. Your file shows it as paid, which some lenders will still consider — others will not.Learn more →

Payday Loan

A small, short-term, high-cost loan. Payday activity on your bank statements is a strong red flag to personal loan lenders.Learn more →

Personal Loan

A fixed-amount loan repaid in regular instalments over a set term, usually 1–7 years. Most personal loans are unsecured, meaning no asset is held as security.Learn more →

Principal

The amount you actually borrow, before interest and fees. Your repayments gradually pay the principal down to zero over the loan term.

Redraw

A feature on some loans that lets you withdraw extra repayments you have made ahead of schedule. Handy for flexibility, but not offered on every loan.

Refinancing

Replacing an existing loan with a new one, usually to get a lower rate, change the term, or consolidate debts. Each application creates a hard enquiry.

Responsible Lending

A lender's legal obligation to check a loan is suitable and affordable before approving it. It is why lenders scrutinise your income, expenses, and statements.

Secured Loan

A loan backed by an asset — often a car — that the lender can repossess if you stop repaying. Security usually means a lower interest rate.

Self-Employed

Someone who runs their own business or contracts for themselves. Lenders usually want 12+ months of trading and tax returns to verify income.Learn more →

Serviceability

A lender's assessment of whether your income can cover the new repayment after all your other commitments. Fail it and the amount is reduced or declined.Learn more →

Soft Enquiry

A credit check that does not affect your score — such as checking your own report, or a lender pre-assessing you. Only you and the checker can see it.

Unpaid Default

A default that has not been repaid. Most lenders will not approve a personal loan while an unpaid default is on your file.Learn more →

Unsecured Loan

A loan with no asset held as security. The lender relies on your income and credit history, so rates are generally higher than a secured loan.

Variable Rate

An interest rate that can rise or fall over the loan term, which means your repayments can change. Often comes with more flexibility, such as extra repayments.

Wage Advance

A service that pays part of your wage early for a fee. Regular use signals cash-flow stress and almost always moves an application to Possible — lender dependent.Learn more →

illion

One of the three Australian credit bureaus, using a 0–1,000 scale. A number of lenders rely on illion data, especially for account and bank-statement history.