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If you need to borrow $5000, there may be several different options available to you, depending on your financial situation. If you’re covering a short-term expense, and expect to be able to repay the loan in a matter of weeks or over a couple of months, a short term small loan may be an option. If you expect it’d take you longer to repay a $5000 loan, some lenders may offer personal loans for $5000 that can be repaid over a year or longer.
Personal loans for $5000
Personal loans typically involve paying back the $5000 you borrow over a relatively long period of time, such as 12 months or more. Between these longer loan terms and the fact that personal loans tend to have lower interest rates than other credit options (e.g. credit cards, payday loans), personal loan repayments are often relatively affordable, making a smaller impact on your monthly household budget.
Before applying for a personal loan, you should calculate whether paying back the $5000 over the longer term may ultimately cost you more in interest charges and fees than some of the other options. The longer a loan’s term, the more repayments you’ll need to make, and the more times you’ll be charged interest on what you owe.
Compare personal loans based on your chance of approval
Technically, a loan for $5000 isn’t a payday loan, but a medium amount loan.According to MoneySmart, payday loans have a cap of $2000, while medium amount loans:
Let you borrow between $2001 and $5000
Are repaid between 16 days and 2 years
Have maximum one-off fees of $400
Charge a maximum annual interest rate of 48%, including all other fees and charges
It’s important to note that much like payday loans, the high interest rates and fees typically found on medium amount loans for $5000 could put you in real financial trouble if you miss a payment. Consider your financial situation and only apply for a $5000 quick loan if you are very confident that you can afford the repayments, and that you’re comfortable with the extra costs that may be involved.
Secured $5000 loans
If you’re looking to borrow $5000 and already own an asset worth a similar amount (e.g. a car, equity in your home) you may be able to use this asset as collateral to guarantee what you borrow. While this means you risk losing your security asset if you default on the loan repayments, you may be able to enjoy a lower interest rate, sometimes even if you’ve had problems with bad credit in the past.
A significant percentage of car loans aresecured loans, and are guaranteed by the value of the car you’re purchasing. However, several of thesesecured car loansare only available for new cars under a certain age, which may cost more than $5000.
If you’re borrowing $5000 to buy something that can’t be used as security, or if you don’t already own a suitable asset for a secured personal loan, you may need to compareunsecured personal loansand similar unsecured credit options.
$5000 credit cards
One option for quickly borrowing $5000 is to use a credit card, though there are risks involved.
Many credit cards offer an interest-free period on purchases, often for between 45 and 55 days from the start of each payment cycle (often per month), provided you clear your credit card balance in this time. If you need $5000 for an urgent one-off purchase, and you’re confident you can afford to repay this debt in under a month or two, then you may be able to avoid being charged interest on this debt.
However, if you’re already managing an outstanding credit card debt, you likely won’t be able to benefit from your card’s interest-free days on new purchases until you’ve paid back your current debt.
Also, interest-free days may not apply to credit card cash advances, which could be a problem if you need to borrow $5000 in cash.
What’s more, as a credit card offers a flexible line of credit, you may be tempted to spend more on your card and increase the size of your $5000 debt – combined with interest charges on what you owe, you could soon find yourself stuck with a credit card debt you can’t easily afford to repay.
$5000 online loans
When you’re comparing different lenders before you borrow $5000, it may be worth including some online-only lenders in your search. Because these businesses tend to be more specialised and have fewer overheads than their competitors, online lenders may charge lower interest rates and fees than some other options. What’s more, your loan application can be conveniently completed from home.
One potential disadvantage of online-only lenders is that they may not be able to offer the kind of customer service you prefer. If your lender doesn’t have branches, you won’t have the option to meet in person and discuss your loan options face to face. Some online lenders only offer customer service by email or online chat, so you may not even be able to talk to the lender over the phone.
Bad credit loans for $5000
Some Australians with bad credit who need to borrow $5000 may see their options limited by their low credit scores. Some lenders specialise in providing personal loans for people with bad credit, though these personal loans are more likely to have higher interest rates. To check your credit, you can order a free copy of your credit file from most credit reporting agencies.
If you have bad credit, don’t apply for a $5000 loan without first comparing the available options and checking the eligibility criteria. Consider contacting the lender and/or a financial adviser first to discuss your options. Make sure you’re confident that your loan application will be approved, as credit checks from lenders and knocked-back loan applications could further damage a bad credit score.
It may be possible to apply for some payday loans and similar small loans with no credit checks, as several of these lenders only look at your current ability to repay the loan when they’re considering your application. Just be mindful of the potentially high cost of some of these options, especially the high penalty fees if you were to miss a payment.
Can I get a $5000 loan if I’m unemployed/on Centrelink?
Most banks and similar lenders require proof of income before they’ll lend money in a $5000 personal loan. Even non-bank lenders and payday loan providers may not be willing to lend money to someone on Centrelink. This is because responsible lenders in Australia are legally obliged not to lend money to people who wouldn’t be able to afford the repayments.
A small number of lenders are willing to lend money to unemployed borrowers and/or to borrowers on Centrelink benefits, depending on how much of their total income comes from these benefits.
If you’re struggling with bad credit, or find yourself in a difficult financial position, there may be options available that could help. Contact afinancial counselloror theNational Debt Helpline for more information about how to recover from a bad credit or bad debt situation.
What about other personal loans?
Can I get a personal loan if I receive Centrelink payments?
A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan – however, the process is easier and faster than taking out a mortgage.
Loan sizes usually range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.
How much can you borrow with a bad credit personal loan?
Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans – they also get loaned less money. Each lender has its own policies, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.
Can I get guaranteed approval for a bad credit personal loan?
Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application.
It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit, because there’s a higher likelihood that the personal loan will be repaid.
So a borrower with good credit is more likely to have a loan approved and to get that approval faster, while a borrower with bad credit is less likely to have a loan approved and to get that approval slower.
While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, with higher interest rates.
Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will guarantee the loan, taking on the financial responsibility if the borrower defaults.
Many personal loans, much like home loans, can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.
If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.
Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.
A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent, without worrying about ending up out of pocket if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.
Can I get a self-employed personal loan with bad credit?
It may be much more difficult for a self-employed borrower to successfully apply for a personal loan if they also have bad credit. Many lenders already consider self-employed borrowers to be riskier than those in full time employment, so several self-employed personal loans require borrowers to have excellent credit.
If you’re a self-employed borrower with a bad credit history, there may still be personal loan options available to you, such as securing your personal loan against a vehicle of equity in a property, though your interest rates may be higher than those of other borrowers. Consider contacting a lender before applying to discuss your options.
What are the pros and cons of bad credit personal loans?
In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts in such a way that it makes it easier for them to repay those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate.
However, this strategy can backfire if the borrower spends the extra money instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.