Guide to getting a small loan under $10,000

By Polly Fleeting ·
young-couple-taking-out-small-loan

When you think of the typical loan, your mind may go to a home loan or new car loan but sometimes there are things in life that we just need a little cash injection for, and that’s where small loans come in. 

Whether it’s to cover wedding costs, fund part of a holiday, cover an emergency or unexpected expenses, it’s important to know the ins and outs of taking out a small loan from a bank or online lender in Australia. 

So with that in mind, here’s a rundown of what they are all about. 

What are small loans?

Here at Mozo, we define small loans as any personal loan that is under $10,000. Just like bigger loans, you can apply for small loans at banks, credit unions, and peer-to-peer lenders, just as long as you meet the lending criteria.

How do small loans work?

When you take out a loan from a bank you will be paying back the loan principal plus any interest charges and fees. The amount of money you have to pay back each month will be determined by the loan term you choose and the interest rate. 

Each month, fortnight or week you must make the minimum repayment in order to pay down your loan and avoid additional late payment fees charged by your lender. 

What type of small loans are there? 

In the same way as there are a range of home loan, business loan or larger personal loan options, there are different types of personal loans that can be used when you are borrowing a small amount of money.

secured-unsecured-loans-fixed-variable-loans

Generally, there’s a choice between a secured or unsecured loan. Which loan option is available will depend on what you’re using the funds for or if you have collateral to put against the loan. 

When it comes to small loans, it’s generally easier to opt for an unsecured option as it requires less paperwork and doesn’t involve assets. However, choosing this type of small personal loan often means slightly higher interest rates than a secured loan. 

Similarly, small loans come with either fixed or variable interest rates

If you need a little peace of mind about the interest rate you are getting and to budget your repayments, an attractive option could be a fixed rate loan. This means that your interest rate and repayments each month will remain the same over the life of the loan. But fixed rate loans offer less flexible repayment options. Plus, there are also break cost fees to consider if you pay out the loan earlier than the agreed timeframe.  

Alternatively, variable rate loans have less fees and more flexible repayment options. However, because the rate is “variable” your interest rate could change during the loan term. You may benefit from rate reductions but there is also the risk of your provider hiking up rates down the track. It’s important to compare both fixed and variable rates when considering a small loan and assess which option provides the better rate for you. 

Also, bear in mind that some small loans come with bonus features such as free extra repayments or a free redraw facility. These features mean that you can pay off your loan faster, saving you on interest and if you need to tap into those extra repayments at a later stage you can. 

What’s the smallest loan I can get?

According to the Mozo database, the lowest personal loan borrowing amount is $500, offered by both Unity Bank and Regional Australia. 

While it’s true you are likely to find smaller quick cash loans around from payday lenders, it’s important to be wary of these types of loans as they often have excessively high interest rates. If you are thinking about taking out a quick cash loan, we urge you to read the Australian Government’s Moneysmart guide on payday loans to learn more about the traps of these loans and possible alternative options.

Are small loans better than credit cards? 

It all comes down to your personal situation and what sort of repayment plan fits you. Here are some of the pros and cons of loans versus credit cards:

Small Loans (Unsecured)

ProsCons
Generally lower interest rates (Current average variable rate on Mozo database: 10.68%)Early settlement fees (Range from: $0 to $300 but can be more)
Set amount of money upfrontApplication fees (Range from: $0 to $600)
Agreed timeframe to pay it offMonthly fees (Range from: $0 to $20 which can add up over the life of the loan)
Can take out as cash if you need to

Credit Cards (with credit limit up to $10,000)

ProsCons
Fast convenient access to money when you need itHigher interest rates (Current average purchase rate on Mozo database: 14.60%)
Suitable for purchases online or in storeAnnual fees (Range from: $0 to $450)
Flexibility to pay as you go (good for holiday or outdoor renovation)Cash advance rate (Current average on Mozo database: 18.64%)
Potential Rewards for your spendingTemptation to continue to use available credit
No fixed repayment period

So, when it comes to comparing small loans against credit cards, it’s a matter of weighing up interest rates, fees, how long it will take you to pay down debt in your current budget and what type of repayment method works best for you. 

Can I get a small loan with bad credit?

Depending on your credit history and which lender you choose, you may be able to take out a small loan with bad credit. There are some lenders that do have tiered rates based on credit score, but interest rates are generally much higher. 

So it might be a good idea to first concentrate on these few things to improve your credit score before you apply for a loan: 

  • Check your credit report for any errors, this may affect your overall credit score.   
  • Crunch the numbers to figure out if you can actually afford to take out a loan. 
  • Demonstrate good savings habits by putting money away regularly and not overspending. 
  • Keep on top of your bills, paying them on time and in full. 

When you do apply for a small loan, make sure the loan amount is something that you can easily payback within the agreed timeframe (or better yet earlier) so that you can improve your credit history and credit rating.

How do I compare small personal loans?

At Mozo we compare over 80 personal loan lenders that offer small loans under $10,000. But how do you sort through them all? 

Well, when considering the small loans on offer there are a few things you should look for and weigh up before signing the dotted line.

things-to-look-for-in-small-loans

To start your search, check out our Personal Loan Comparison Calculator and weigh up some great small loan options. 

Can I get a small loan online?

Yes, you can get a small loan online. And in some cases you could have the money in your account in a matter of minutes after loan approval. 

If you need a hand choosing the right online lender for you, check out our Online Personal Loans Guide

How do I apply? 


In most instances when applying for a small loan online, it's a case of following the prompts. However there is some information that you’ll need to have handy no matter which option you choose. 

Personal information you may need: 

  • Name, birthdate and address 
  • Driver’s licence number 
  • Passport details
  • Utility bills that have been paid in your name (to show your current address) 

Other information you may need: 

  • Proof of income (payslips or tax return) 
  • Proof of employment 
  • List of any assets or liabilities you have 
  • Loan amount and term you are seeking 

NOTE: It’s important to check that all the information on your application is true and correct, to give yourself the best chance at being approved. 

So, if you’re on the hunt for a killer small loan, take a look at our personal loan comparison table for some great options.

Polly Fleeting
Polly Fleeting
Money writer

Polly Fleeting is a personal finance writer here at Mozo, specialising in loans and credit cards. Her work is aimed at helping people find ways to make smart product choices, reduce debt and get more for their hard-earned dollars. Polly has a degree in Journalism from the University of Technology, Sydney.