More than ever, Australians are turning to personal loans, with a record $2.5 billion worth of personal loans written in October, Australian Bureau of Statistics (ABS) data reveals. 

And many personal loan providers on the market right now offer a notable advantage to their peers: A lack of early exit fees. 

That’s according to Premier Asset Finance director Nick Gleeson, who says borrowers should look beyond the big four banks when hunting for a new finance product.

Early exit fees, sometimes called early repayment fees, are fees charged by a lender if a borrower pays their loan off earlier than expected.

They can often come to a few hundred dollars, depending on how much is owed on the loan when it's paid off, its interest rate, and other factors. 

The likes of Wisr, Plenti, and Now Finance – each of which are non-bank lenders – don’t charge early repayment fees on personal loan products, a factor Mr Gleeson calls a “game-changer”.

“They're just another solution, among numerous solutions available today,” he told Savings.com.au.

“Early termination fees, for a lot of lenders, are as clear as mud.

"They hinge on factors such as prevailing interest rates, the original cost of borrowed funds, and the current rate at the time of repayment. It's a convoluted system.

“This new way of not having early termination fees, or charging a fixed amount, is much better than the old way.”

Early exit fees are more commonly found on secured and fixed rate personal loan products, which typically offer lower interest rates than their variable rate peers.  

That’s because, to finance a secured or fixed rate loan, banks and lenders will generally borrow funds on money markets. 

If the loan is paid back earlier than expected, the lender could end up paying more in interest than it makes from the loan. 

Personal loans without early termination fees are particularly useful in cases of debt consolidation, Mr Gleeson notes. 

Consolidating multiple debts, such as car loans, credit cards, or other consumer finance, into a single personal loan can help a person to take control of their finances and manage their repayments.

"It enables individuals to move away from relying on credit cards and managing multiple interest rates from various sources," he said.

"With consolidation, you can merge these debts into a single entity and proceed to pay it off at your own pace.

"Whether it's utilising your tax refund for faster repayment, making periodic lump sum payments, increasing monthly contributions, or even just settling for the minimum payment during financially challenging months, debt consolidation provides flexibility to alleviate financial pressure."

Shopping around for a personal loan, rather than going directly to a bank, can allow access to more ‘tailored’ finance products, Mr Gleeson notes.

A would-be borrower can approach a broker or compare loans on Savings.com.au, and by considering all their options, they could identify a loan more conducive to their lifestyle.

“A bank will try and make their products suit your needs,” Mr Gleeson said.

“Whereas a broker can actually find the right product to suit your needs, using a range of different lenders.”

Image by Chang Duong on Unsplash.