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If you're strapped for cash and an unexpected expense arises, like a medical bill or hefty car repair costs, you might be wondering what financing options may be available to you.

Personal loans aren't reserved for borrowers who want to take out a large sum and need several years to pay it back. There are plenty of short term personal loan options to consider, but it's important to determine the type of loan that will best suit your needs before submitting an application.

What is a short term personal loan?

Generally speaking, most personal loan providers in Australia offer loan terms between two and seven years. But if you're just looking for a small loan amount and plan to pay off your debt quickly, you might be considering a short term loan.

There are two different kinds of short term personal loans that have a few key differences.

1. A standard personal loan on a shorter term

With loan terms as short as 12 months, and sometimes even less, this kind of personal loan provides borrowers with the same features as any other standard personal loan from a range of reputable lenders. 

If you have a good credit score and meet all of the eligibility requirements, it's possible to find competitive rates and low fees with this kind of loan, minimising the total cost.

To find and compare personal loans of this kind, consider using RateCity's personal loan comparison table. Simply filter the results by the length of the loan.

2. A payday loan

Sometimes referred to as a fast cash loan, a payday loan allows you to borrow up to $2,000 on a loan term of between 16 days and one year.

While payday loans might seem like an attractive short term loan option due to their typically faster approval times and promise of quick cash, there are a number of downfalls associated with this kind of financing option, including the following:

  • Large establishment fees - According to ASIC’s MoneySmart website, the maximum establishment fee a payday lender can charge is 20 per cent of the amount borrowed. So if you're borrowing $2000, that could mean a $400 fee straight off the bat.
  • High regular monthly fees - Monthly fees are capped at 4 per cent of the amount borrowed, but they can really add up - particularly on top of other fees.
  • Potential to snowball - The cost of repayments after fees are added may lead to further financial stress, and potentially risk damage to your credit score.

How do I compare short term personal loans?

If a standard personal loan is what you're after, it's important to understand how to compare one loan product to the next. Here are some of the key factors to consider when shopping for a personal loan:

  • Interest rate - A good place to start is to compare interest rates, as that will determine the amount of interest you will be charged over the life of the loan. Just remember to factor in any fees when determining loan costs.
  • Comparison rate - Looking at different comparison rates can give you a better idea of the overall cost of the loan, as a loan's comparison rate will include both the interest rate and any main fees.
  • Secured vs unsecured personal loans - If you have an asset you're willing to put up as collateral, you might consider a secured personal loan. Otherwise, an unsecured personal loan might be your best bet.
  • Fees - There are a number of different fees you may be charged, and the amount will typically vary from one loan to the next. These can include application fees, establishment fees, extra repayment fees, early repayment fees and other ongoing monthly fees.
  • Features - Different loans come with different features, so it's a good idea to ultimately choose one that offers what you need, such as unlimited extra repayments and flexible repayment options.

What are the alternatives to short term personal loans?

It's always worth weighing up all of your options before taking out a loan. Here are some alternatives to short term personal loans:

  • Request an extension - If you have an overdue bill and you need some extra time to pay it, consider reaching out to the issuer to see if you can negotiate a payment plan or extension.
  • Apply for a Centrelink advance - If you are experiencing financial difficulties, you may be eligible for an advance on your Centrelink payments from the Australian Government.
  • Seek financial counselling - Consider speaking to a financial counsellor from the National Debt Helpline for free help with sorting out any money problems you might be experiencing.

Should I use a short term personal loan or a credit card?

Another form of finance that might be worth considering, depending on your personal circumstances, is a credit card. If you're looking to borrow a small amount and have the means to repay the debt over a short period of time, a credit card with a zero per cent interest rate period might be an option.

With a zero per cent interest credit card, customers can make purchases and payments with zero per cent interest charged over a pre-determined period of time up to 24 months. 

While you won't be charged interest during this time, it's important to remember that the credit card balance must be paid off in full before the interest free period expires, in order to avoid being charged interest at the revert rate.

Credit cards with zero per cent interest periods will typically still have other fees attached, so be sure to factor this in when doing your calculations to decide what's right for you.

How can I find a short term personal loan at RateCity?

RateCity's database of over 90 reputable lenders allows you to search and compare a wide range of standard personal loans to find one that suits your needs.

Save yourself the hassle of shopping around by using a personal loan comparison table that allows you to filter products by interest rates, security type, features and more.

Once you have an idea of what might be available to you, consider using RateCity's personal loan calculator to get an estimate of your potential loan repayments. Simply enter your preferred loan amount, interest rate, loan term and credit score to find out what your weekly, fortnightly or monthly repayments might look like.

As with any credit product, be sure to calculate whether the repayments will fit comfortably into your budget before you begin the loan application process. For advice specific to your personal financial situation, consider reaching out to a financial adviser or broker.

Improve your credit score before you apply

A bad credit rating might limit your chances of securing a loan - and even if you are successful, it's unlikely you'll be offered a competitive rate.

If you're having a hard time getting a loan due to lenders running a credit check on your less-than-ideal credit history, you might like to consider taking steps towards improving it.

Visit RateCity's credit score hub to get your credit score for free, and find out more about how to build it.

Frequently asked questions

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.

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 repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

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.

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 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.

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.

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.

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 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.

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.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to help decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate if you apply for a personal loan.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.

Can I get a personal loan if I receive Centrelink payments?

It is hard, but not impossible, to qualify for a personal loan if you receive Centrelink payments.

Some lenders won’t lend money to people who are on welfare. However, other lenders will simply consider Centrelink payments as another factor to weigh up when they assess a person’s capacity to repay a loan. You should check with any prospective lender about their criteria before making a personal loan application.

How do I consolidate my debt if I have bad credit?

The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.

However, people with bad credit histories can make debt consolidation work by following this three-step process:

  1. First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
  2. Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
  3. Third, instead of spending those savings, use them to pay off the new loan.

What interest rates are charged for personal loans?

Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.

For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.

For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.

Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.

Can I get an easy/instant personal loan?

Some lenders are able to approve applications with little documentation and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.

How do I find out my credit rating/score?

You're entitled to one free credit report per year from credit reporting bodies like Equifax, Dun & Bradstreet, Experian and the Tasmanian Collection Service. You can also get a free report if you’ve been refused credit in the past 90 days.

Credit reporting bodies have up to 10 days to provide reports. If you want to access your report sooner, you’ll probably have to pay.