Westpac offers personal loan interest-free period

Westpac has extended its interest free support measures to its personal loan customers.

Westpac’s consumer chief executive David Lindberg, said the interest free measures would apply to credit card, personal loans, and home loans. Picture: AAP

Westpac has extended its three-month interest free period to its personal loan customers who have been financially impacted from the economic shutdown caused by coronavirus.

The support initially rolled out to its credit card customers will now be available to secured and unsecured loan holders at all of the Westpac banking group’s brands.

Westpac, St George, Bank of Melbourne and BankSA loan holders who have either suffered a job loss or reduction in working hours will be eligible to suspend interest and principal repayments for up to three months.

Australia’s second-largest bank is the first of the big four to implement pauses on interest charges upon credit cards and personal loans, while other major incumbents are only offering deferrals on principal repayments.

Westpac’s consumer chief executive, David Lindberg, said the interest free measures are applicable to credit card and personal loans.

“We know this is a tough time for customers, who are telling us that their jobs are impacted and that they are worried about their finances,” Mr Lindberg said.

“We have expanded our COVID-19 consumer support package to provide additional assistance for personal loan customers, including pausing repayments and charging no interest for three months.”

Interest will not be accrued or charged on outstanding balances, nor will accounts incur any administration charges during the period.

Data obtained by RateCity indicates the minimum advertised rate for a Westpac unsecured personal loan is 11.99 per cent, while a secured loan attracts a minimum rate of 8.49 per cent.

RateCity research director Sally Tindall said the measures taken by Westpac will ensure customers don’t face the burden of accruing interest amounts during the downturn.

“As a result of this package, personal loan customers who have little option but to defer their repayments will be able to do so knowing that the bill at the other end of the pause won’t be higher than when they started,” Ms Tindall said.

Personal loans are fixed instalments paid often on a monthly basis. Ms Tindall noted potential job losses caused by the pandemic could put some customers at risk of not being able to pay down loan payments.

“They’re not like credit cards where the lender only asks you to pay two or three per cent, they’re structured so you clear the debt in a timely manner,” Ms Tindall said.

“There’s going to be a lot of Australians out there that just won’t be able to meet these repayments as a result of COVID-19.”

ANZ’s current minimum advertised rate for an unsecured personal loan sits at 12.45 per cent, while Commonwealth Bank are offering variable and fixed rates between 11.5 per cent and 18.5 per cent. NAB’s personal unsecured loans begin at 9.99 per cent and range up to 18.99 per cent.

Personal loans are usually calculated on a fixed-based pricing model to determine the interest rate on offer. The rate offered is based on a customer’s credit score and profile.

“As a result, people with an excellent credit history and steady jobs are more likely to be offered a lower interest rate, than someone with an average or poor credit history,” Ms Tindall said.