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What is the minimum amount I can borrow on a personal loan?

What is the minimum amount I can borrow on a personal loan?

When looking into getting a personal loan one of the first questions customers ask is how much money they’re eligible to borrow. But what if you only need to borrow a small amount?

It’s not uncommon for Aussies to face higher-than-expected bills and need a little help paying them off or be short just a few thousand dollars from their savings goal. This is where smaller sum personal loans may offer a helping hand, depending on your financial situation and budget.

In terms of the minimum amount one can borrow, most personal loan lenders generally offer financing from $5,000 to upwards of $50,000. If you’re looking for a smaller loan sum, there may be alternative financing options worth considering.

Let’s explore some common scenarios in which small personal loans or an alternative financing option may suit.

Scenario 1 – You’re short funds for your savings goal

Whether you’re saving up for a car, a holiday, or your wedding, sometimes our scrimping and careful budgeting doesn’t meet our deadlines. For the debt averse, borrowing money can seem like you’ve failed in saving up. This is where it’s important to look at credit as a tool that may be useful for those who manage it responsibly.

If you’re only a few thousand dollars away from your savings goal and you’ve been diligently saving for some time, a small personal loan may be worth considering. After all, if you’ve already done the hard work of saving up most of the money needed for your wedding, for example, then you’re potentially saving thousands in interest by not taking out a personal loan for the full cost. Further, your budget is already set up to make regular savings deposits, so you can just divert these funds towards making loan repayments for the future.

Alternatively, if you’re just looking for some extra cash for a holiday, it may be worth considering a travel credit card. Not only might this offer you access to a line of credit, you may also enjoy benefits like no foreign transaction fees or frequent flyer rewards, depending on the credit card issuer.


Scenario 2 – You’re short on cash to pay bills

Another scenario in which you may be considering taking out a small personal loan is the frustrating situation of having bills you cannot afford to pay, such as your energy and gas bills.

However, if you’re struggling financially due to lost income or mounting debts, it might be better to consider an alternative. Adding to your expenses through taking out a personal loan may only increase your financial stress, especially if that means making interest repayments on a loan for up to five years due to one overdue bill.

Banks and utility providers are experienced in helping customers who are working through rough patches, and 2020 demonstrated just how far they were willing to go to give people breathing room to pay their bills.

If you’re unable to pay your bills in full, consider calling up your provider and requesting hardship support. The provider should work with your finances and offer you a payment plan that you’re able to afford. They may even freeze repayments for a set period, so you can save up the funds needed for the bills.


  • Talk to provider about a payment plan and/or hardship support

Scenario 3 – Unexpected medical costs

They say to expect the unexpected and unfortunately this is true of the occasional medical bill as well. If you chip a tooth or need a root canal, for example, the cost of repair can easily blow out an average person’s budget.

If you don’t have the funds on hand and need a little financial help, unexpected medical costs may be a reason to consider taking out a small personal loan. Health insurance doesn’t always cover your medical needs, and if it does there may be an excess you need to pay out of pocket. A small medical personal loan may help you to pay off these unexpected costs, if the worst were to occur.

Alternatively, some doctors and dentists do offer ‘buy now, pay later’ payments for smaller medical costs. This may be a competitive option to consider if you can afford the part payments, especially as it cuts out interest charges. Plus, if you only need a few hundred dollars, this can save you having to borrow $5,000 or more, depending on a personal loan provider’s minimum loan amount.


Scenario 4 – Your car is damaged, and an insurance payout is delayed

Another situation that may pop up in which you need a smaller loan is if your car were to be damaged. In the event that you need to pay for repairs, oftentimes insurance companies can be slow to pay out the necessary funds. The insurance provider may even contest your claim, leaving you in the lurch – especially if you use your vehicle for work.

This is where a smaller personal loan may come in handy. Not only can these funds help to get your car back in working order, if your insurance claim comes through then you have the funds ready and available to pay off the loan.

Please note that this option will involve repaying interest on top of your repair bill. It may be more financially reasonable to wait it out for your insurance payment to avoid costly interest charges.

Alternatively, you could put the cost of repairs on your credit card if your credit limit allows it. But if you’re unable to pay off your balance by the end of your statement period you will be charged interest. The interest on a credit card is higher on average than that of a personal loan, so if you’re going to be charged interest regardless then it’s worth keeping this in mind.


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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.



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Learn more about personal loans

What is a personal loan?

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 typically 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.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

Can you refinance a $5000 personal loan?

Much like home loans, many personal 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.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility of your home, car or personal loan.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

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 and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Should I get a fixed or variable personal loan?

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. You won't have to worry about higher repayments 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 bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Are there low doc personal loans?

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.