Personal Loans – Boost or Bust Your Credit? (2026)

Are you considering a personal loan but worried about the potential impact on your credit score? You're not alone. Many Australians share this concern, especially in today's economic climate. With the right information and guidance, personal loans can be a useful tool without damaging your credit. Let's explore this topic in detail and provide you with the insights you need to make an informed decision.

Understanding Personal Loans and Credit Scores

Personal loans are a form of unsecured credit that allows borrowers to access funds for various purposes such as debt consolidation, home renovations, or unexpected expenses. Unlike secured loans, they do not require collateral, which often results in slightly higher interest rates. Understanding how personal loans affect your credit score is crucial. Your credit score is influenced by several factors, including your payment history, credit utilisation, and the types of credit used. A personal loan can impact these areas both positively and negatively.

Current Market Information and Loan Options

As of 2026, the Australian personal loan market offers a wide range of options with competitive interest rates. Generally, personal loan interest rates range from 6.49% to 12%, but they can vary based on the lender and your creditworthiness. At Esteb and Co, we have access to over 83 lenders, providing a broad spectrum of choices to suit different financial situations.

Lender	Interest Rate	Min. Loan Amount
Lender A	6.49% - 9.99%	$5,000
Lender B	7.25% - 10.75%	$10,000
Lender C	8.00% - 12%	$3,000

Eligibility criteria often include a stable income, a good credit history, and meeting the minimum age requirement of 18 years. Lenders may also require employment verification and residency status checks. It's essential to compare different loan options to find one that aligns with your financial goals and repayment capabilities.

How To Make Personal Loans Work for You

Using personal loans wisely can improve your financial standing and even positively impact your credit score. Here’s how:

1. Assess Your Needs: Determine the actual amount you need and avoid borrowing more than necessary.
2. Shop Around: Use Esteb and Co's extensive lender panel to compare interest rates and terms.
3. Read the Fine Print: Understand the fees, charges, and any potential penalties for early repayment.
4. Create a Repayment Plan: Ensure that your monthly repayments fit comfortably within your budget.
5. Monitor Your Credit: Keep an eye on your credit report to see how the loan affects your score.

Tips and Considerations

Here are some expert tips to keep in mind when considering a personal loan:

• Consolidate Debt Wisely: If you're using a personal loan for debt consolidation, ensure that the interest rate is lower than your existing debts.
• Maintain a Good Credit Mix: Having both revolving credit (like credit cards) and installment credit (like personal loans) can improve your credit score.
• Timely Payments: Consistently making on-time payments will positively impact your credit score over time.
• Avoid Multiple Applications: Each loan application can slightly lower your credit score due to hard inquiries. Apply only when you're ready to commit.

Frequently Asked Questions

Here are some common questions we receive about personal loans and credit scores:

Q1: Can a personal loan improve my credit score?

A1: Yes, if managed properly. Making timely payments can boost your credit score by enhancing your payment history.

Q2: How long does a personal loan affect my credit score?

A2: The impact can last for the duration of the loan term and beyond, as your payment history is recorded on your credit report.

Q3: Will applying for a personal loan hurt my credit?

A3: Initially, applying may cause a slight dip due to a hard inquiry. However, consistent repayments can quickly offset this.

Q4: What happens if I miss a payment?

A4: Missing payments can negatively impact your credit score and lead to additional fees. It's crucial to contact your lender immediately if you foresee any issues.

Q5: Can I pay off my personal loan early?

A5: Many lenders allow early repayments, but it's important to check for any early repayment fees before doing so.

Q6: How do I choose the right lender?

A6: Consider interest rates, fees, repayment terms, and lender reputation. Utilising Esteb and Co's network can simplify this process.

Q7: What's the minimum credit score required?

A7: This varies by lender, but a score of 600+ is generally favourable. However, some lenders cater to those with lower scores as well.

By understanding personal loans and how they can affect your credit score, you can make informed decisions that support your financial health. Remember, at Esteb and Co, we're here to assist you with a wide range of options from our extensive lender panel. Whether you're looking to consolidate debt or finance a new venture, we're ready to help you navigate the process with confidence.