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Personal Loans vs Cash Loans

A cash loan is another term for a payday loan – a small loan ($2000 or less) that’s repaid over a short term, between 16 days to 1 year. You don’t pay interest on cash loans, but you’ll be charged fees instead. While the exact amount will vary depending on the loan provider, the maximum fees they can charges are:

  • a one-off establishment fee of 20% (maximum) of the amount loaned
  • a monthly account keeping fee of 4% (maximum) of the amount loaned
  • a government fee or charge
  • default fees or charges (up to twice (200%) the total amount of the loan, including any repayments you made under the contract plus default fees)
  • enforcement expenses (if you fail to pay back the loan, these are the costs of the credit provider going to court to recover the money you owe them)

Personal loans can be used to borrow larger sums of money, and may be paid back over longer lengths of time; often between 1 and 5 years. Personal loans are usually bigger commitments than cash loans, though the additional security requirements and credit checks means it’s less likely you’ll be approved for a loan you can’t afford to repay.

Before taking out a payday loan or cash loan, it’s important to consider what other financial options may be available to you. Depending on your circumstances, you may be able to find other ways to access the money you want without applying for a risky and potentially expensive payday loan.

Personal loans and cash loans aren’t the only financial options to consider, either – depending on what you need, there may be other financial products better suited to your requirements.

Can I get a personal loan to pay off another personal loan?

Responsible lenders are generally less likely to approve an application for a personal loan or cash loan if you already have other loans outstanding, as you may be considered to be at greater risk of default. However, depending on your personal credit history, it’s sometimes possible to get a personal loan to help you pay off other debts.

Debt consolidation personal loans involve borrowing a sum of money to pay off several smaller debts (e.g. outstanding payday loans, credit card balances, car loans etc.), then paying off the new loan over time. Swapping multiple debts for just the one can often help to simplify your household budget, and relieve some financial pressure.

Different lenders will have different terms and conditions around any debt consolidation personal loans they offer, so you’ll likely need to contact them directly to know for sure whether your application would be considered.

Which is better: a car loan or a personal loan?

Car loans and personal loans are often very similar, with many car loans essentially being specialised personal loans.

Car loans are often secured by the value of the vehicle you’re buying, which helps to keep their interest rates on the low side. However, to make sure the value of the vehicle will guarantee the loan in case you default, you may be limited to buying certain types of vehicles that are under a certain age.

If you want to purchase an older used car or other vehicle whose value likely won’t be enough to secure a loan, you may still be able to get vehicle finance through an unsecured personal loan. These loans generally don’t require security, making them a more flexible option, though they’re more likely to have higher interest rates.

It’s also possible to use a payday loan to help you buy a car, though this would likely be no different than taking out a cash loan for any other purpose. You can’t use your car as security for a payday loan, so all the same financial risks would apply.

Is a business loan better than a personal loan?

If you’re starting or expanding a business, you may have the option to use either a personal loan or a business loan to find the necessary finance, depending on your circumstances.

To apply for a business loan, you may need to provide a business plan or records of your company’s financials to help demonstrate that your earnings will let you keep up with the repayments. Responsibility for the loan will be shared between yourself and your business partners.

The terms of a personal loan will typically be based on your own ability to repay a loan as an individual, separate from any income from your business. If you find yourself unable to afford the loan and default, this will appear in your personal credit history and be reflected in your credit score.

Remember that some lenders only offer personal loans for specific purposes, and may not allow personal loans for business use. Check with your preferred lenders to be sure. 

Is a personal loan better than credit card?

Personal loans and credit cards are both convenient for borrowing money, but may be better suited to managing different types of expenses.

A credit card offers a flexible line of credit, where you can repeatedly borrow and repay small sums of money up to the card’s limit, which can be handy for taking care of small purchases and everyday expenses. If you pay off your credit card regularly, you may never be charged interest on what you borrow, but if you exceed the card’s interest-free days, interest charges on your purchases could start building up faster than you can afford to comfortably pay them back.

Personal loans are often more structured and less flexible than credit cards, in that you borrow a lump sum of money at the start of your personal loan and commit to paying it back, plus interest, over a pre-set term. This can make a personal loan a handy option for making a single large purchase that’ll take some time to pay off.

In some cases where a credit card isn’t accepted, you may still be able to use your card to make a cash advance – effectively taking out a cash loan from your credit card. It’s important to remember that many credit card providers treat cash advances differently to regular credit card purchases – interest rates in cash advances are often higher than for credit card purchases, and you may be charged interest straight away, without the grace period of interest-free days.

Frequently asked questions

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.

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.

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.

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.

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.

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.

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.

Can I get a no credit check personal loan?

Personal loans with no credit checks are available and called ‘payday loans’. These are sometimes used as short-term solutions for cash-strapped Australians. They often carry higher interest rates and fees than regular personal loans, and individuals risk putting themselves into a worsened cycle of debt.

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.

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.

Do student personal loans require security?

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, which typically have 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 fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

Are there emergency loans with no credit checks?

While many personal loans require a credit check as part of the application process, some personal loans and payday loans have no credit checks, which may appeal to some borrowers with a bad credit score.

Keep in mind that even if a loan is available with no credit check, the lender will likely want to confirm that you can afford the repayments on your current income.

What is an unsecured bad credit personal loan?

A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset, such as a car or jewellery, as collateral or security. Lenders generally charge higher interest rates on unsecured loans than secured loans.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

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, which can help make it easier for them to clear 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 and potentially fewer fees.

However, this strategy can backfire if the borrower spends the loaned funds 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.

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.

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.

Who calculates your credit rating/score?

Credit ratings or credit scores are calculated by credit reporting bodies. The main bodies are Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service.

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 be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

What causes bad credit ratings/scores?

Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.