Personal loan fees in Australia: establishment, monthly, late and early repayment fees

The main personal loan fees in Australia are an establishment fee at the start, an ongoing monthly or annual account fee, late payment and dishonour fees if a repayment fails, and an early repayment or break fee if you pay out a fixed loan early. Upfront and ongoing fees are built into the comparison rate; event-based fees such as late and early repayment fees are not. Before you sign, ask for every fee in dollars, check whether the establishment fee is paid upfront or added to the loan (so you pay interest on it), and read the financial table in the contract, which the National Credit Code requires lenders to give you.

This guide is part of the personal loan requirements and comparison rates overview. Figures are illustrative.

The fees you may see

What the law says about fees

• Disclosure. Before you sign, the National Credit Code requires a pre-contractual statement or contract with a financial table setting out the amount of credit, the annual percentage rate, repayments, total interest (where ascertainable) and the fees and charges you will pay.
• Only fees in the contract. A lender generally cannot charge a fee that is not provided for in the contract.
• Unconscionable fees. Section 78 of the Code allows a court to annul or reduce an establishment fee, early termination fee or prepayment fee if it is unconscionable. An establishment fee is compared with the lender's reasonable costs of assessing and setting up the loan; an early termination or prepayment fee is compared with a reasonable estimate of the lender's loss from early repayment.
• Caps on high-cost credit. Most non-bank lenders cannot exceed a 48% annual cost rate under section 32A, and small amount credit contracts have their own caps of a 20% establishment fee plus 4% a month. See payday loans and medium amount credit caps.
• Unfair contract terms. Consumer protection law on unfair terms in standard form contracts, in the ASIC Act, can apply to fee terms in consumer loan contracts.

Worked example: a fee added to the loan (illustrative)

You borrow $12,000 over three years at 11% with a $500 establishment fee.

Option A — pay the fee upfront in cash:

• Repayment on $12,000: about $392.86 a month
• Total repayments: about $14,143, plus the $500 fee = $14,643

Option B — fee added to the loan balance:

• Loan balance becomes $12,500
• Repayment: about $409.23 a month
• Total repayments: about $14,732

Adding the fee to the loan costs about $89 more over three years because you pay interest on it. The true annual cost of option B, measured against the $12,000 you actually use, is about 13.8% — almost 3 percentage points above the 11% interest rate. Add a $10 monthly fee and the cost rises to about 15.7%. You can test the weight of fees in the fee impact calculator.

Fees that are easy to overlook

Monthly fees after early payout

If you pay out early, you should no longer be charged account fees for months after the loan is closed, but check how the payout figure is calculated. For small amount credit contracts, a monthly fee cannot be charged for the months after the loan is fully repaid.

Late and dishonour fees that stack

A failed direct debit can trigger both a dishonour fee and a late fee, and your bank may charge its own dishonour fee too. Aligning your repayment date with your pay day is the cheapest fix. If you are regularly short, talk to the lender about hardship before the fees build up.

Add-on insurance

Lenders and dealers may offer consumer credit insurance, loan protection or similar products. They are optional. Since 2021 the deferred sales model rules have restricted how add-on insurance can be sold with car finance, and the ban on hawking applies to unsolicited offers of financial products. If you were sold insurance you did not need, you may be able to complain.

How to compare fees between offers

1. List each offer's establishment fee, monthly fee and early repayment fee in dollars.
2. Multiply the monthly fee by the number of months.
3. Add the fees to total interest from the repayment calculator.
4. If you might repay early, add the early repayment fee for the year you expect to pay out.
5. Compare the totals. The three-quote worked example shows the process.

Read the comparison rate guide to see which fees the comparison rate captures and the fixed vs variable guide for break costs.

Frequently asked questions

Can a lender increase its fees during the loan?

Only if the contract allows it and the lender gives you notice as required by the National Credit Code. New or increased fees generally need written notice before they take effect.

Is the establishment fee refundable if I pay out in the first month?

Usually not; it covers the cost of setting up the loan. If it is much higher than the lender's set-up costs, it may be challengeable as unconscionable, but that is a high bar.

Do personal loans include GST on fees?

Interest and most lender fees on credit are financial supplies that are generally input taxed, so no GST is added. Third-party charges may differ.

Can I negotiate fees?

Sometimes. Lenders may waive or reduce establishment fees for existing customers or strong applicants, and some brokers can negotiate. Ask before you apply, not after you sign.

Sources and where to check

• ASIC Moneysmart — personal loan fees and add-on insurance
• ASIC — National Credit Code guidance and the deferred sales model
• Federal Register of Legislation — National Credit Code ss 32A and 78
• Australian Financial Complaints Authority — disputes about fees