Claim Interest on Personal Loans? Here's How to Save (2026)

Are you wondering if you can claim interest on a personal loan? Many Australians face this question, especially when juggling various financial commitments. Understanding the intricacies of personal loan interest and potential tax claims can be a game-changer in managing your finances more effectively. Let's dive into the possibilities and practicalities of claiming interest on personal loans in Australia.

Understanding Interest on Personal Loans

Personal loans are a popular financial tool, offering flexible solutions for diverse needs such as consolidating debt, funding a holiday, or covering emergency expenses. However, the interest component of these loans often raises questions, particularly around tax deductions. Generally, personal loan interest is not tax-deductible in Australia, as these loans are typically used for personal rather than investment purposes. However, exceptions exist when the loan serves a business or income-generating purpose.

Interest Rates and Eligibility Criteria

The interest rate on personal loans in Australia varies based on several factors, including the lender, loan amount, and the borrower's creditworthiness. As of 2026, typical interest rates range between 6.49% and 12%, though rates can occasionally be lower or higher depending on the circumstances. Let's explore some key aspects:

When considering a personal loan, it is crucial to compare different lenders. Esteb and Co, with access to over 83 lenders, can help you find a loan that suits your needs, ensuring competitive rates and favourable terms.

How to Claim Interest on Personal Loans

If your personal loan is used for business or investment purposes, you may be able to claim the interest on your tax return. Here's a step-by-step guide:

1. Determine Loan Purpose: Confirm that your loan is used for income-generating activities.
2. Maintain Accurate Records: Keep detailed records of how the loan funds are allocated.
3. Consult a Tax Professional: Seek advice from a tax expert to ensure compliance with ATO guidelines.
4. Prepare Your Tax Return: Include the interest as a deduction in the appropriate section of your tax return.
5. Submit Documentation: Be ready to provide documentation if the ATO requests proof of the loan's purpose.

Expert Tips and Considerations

Before you decide to claim interest on a personal loan, consider these expert tips:

• Assess Financial Impact: Weigh the benefits of claiming interest against potential scrutiny from the ATO.
• Loan Structuring: If using a loan for both personal and business purposes, consider splitting it to ease record-keeping and tax deductions.
• Review Loan Terms: Understand your loan's terms thoroughly to avoid unexpected fees or penalties.
• Continuous Monitoring: Regularly review your financial situation and loan usage to ensure continued eligibility for claims.

Frequently Asked Questions

1. Can I claim interest on a personal loan used for home renovations?
   If the renovations are for a rental property, the interest may be deductible. Consult a tax advisor for specific guidance.
2. What if I use part of the loan for personal use and part for business?
   You may claim the business portion of the interest, but accurate records are essential.
3. Is interest on a personal car loan deductible?
   Only if the car is used for business purposes. Keep detailed usage logs.
4. Can I claim interest if I refinance an existing personal loan?
   Refinancing itself does not affect deductibility. The loan's purpose remains the key factor.
5. How can Esteb and Co assist in finding the right loan?
   With access to 83+ lenders, Esteb and Co can help you navigate options to secure a loan with competitive rates and terms tailored to your financial goals.