Personal loans: What you need to know

Personal loans between individuals (e.g., family members)

The loan agreement evidences in writing the arrangement of the parties for the lender to lend money to the borrower or personal loans. Moreover, this is a legally binding contract enforceable at law.

The loan agreement provides a more detailed account of the loan transaction. For example, when are the personal loans to be repaid, whether interest is payable and how is the same calculated. It may also include clauses for what happens in the event that the borrower dies or becomes mentally incapacitated, and what are the events of default that will hasten the repayment of the loan. 

Personal loans from an institution

A personal loan is usually a loan from a lender that is used to purchase personal items such as furniture, a car, or to take a holiday or pay out your credit card.

The rates of interest charged by lenders for personal loans vary.  However, the rates are usually higher than mortgage rates, but lower than credit card rates.

A personal loan can be secured or unsecured. If it is secured, however, it will not be secured over real property (i.e., a house or land). A loan secured over real property is known in the finance industry as a “mortgage loan.” Other types of secured loans include loans secured by furniture, motor vehicles, etc. Moreover, such are typically provided by the seller of the item that is the security for the loan.

Legal obligations under a contract

A personal loan, whether secured or unsecured, is a legally binding contract between you and the lender. Furthermore, the lender agrees to lend you a sum of money and you agree to repay the loan together with interest.

an image of a happy male businessman who got his personal loans approved


The Australian Securities and Investments Commission (ASIC) is the national regulator for consumer credit (e.g., home loans, personal loans, credit cards, financial advice services). ASIC licenses and regulates banks, credit unions and brokers to ensure they do not give credit you cannot pay back. 

Meanwhile, the laws that provide protection for the borrower are covered under the National Credit Code.

Your consumer rights

Australian Consumer Law guarantees your rights when you buy goods and services. In fact, most products and services purchased after 1 January 2011 come with an automatic consumer guarantee that what you purchased will work and do what you asked for. This also includes credit and loan services.

Withdrawal at any time before loan is made

You are entitled at any time prior to the money being given to you, even after you have signed the loan contract, to withdraw from the loan.


an image of a happy young woman checking her completer personal loans payments

Need help with your Personal Loans?

AussieLegal offers affordable legal kits and paralegal services to help you address a range of legal matters. This includes a DIY Loan Agreement kit that enables you to create your own legally binding agreement as to your unsecured loan.

Need more options? Call us on 1300 728 200 to discuss your situation with one of our consultants.

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