Short term personal loans

Also known as a ‘payday loan’ or ‘fast cash loan’, a short-term personal loan is designed to provide you with immediate, small amounts of cash that will tide you over until your next paycheck.

In Australia, short-term personal loans are usually for amounts of around $2,000 or less. You’ll often see ads for these 'fast' lenders pop up during late-night TV ad breaks!

But be aware that these ‘quick cash loans’ typically come with a lot more fees than your average personal loan or credit card would.

Payday loans can become addictive (as in recurring) and potentially lead a vulnerable borrower to spiral into an unaffordable amount of debt.

So, it’s very important to understand exactly how a short-term personal loan works before taking one out.

Should you ever find yourself in a situation where you need quick access to cash, one potential (and typically “last resort”) finance option could be a short-term personal loan.

Here are some circumstances when you might need a short-term personal loan:

• Bonds/moving expenses
• Car repairs
• Furniture/household items
• Unexpected bills
• Unexpected expenses
• School fees

If you need a loan for a short period of time, a fast cash loan isn’t your only option. Some traditional banking alternatives to consider could be a personal loan or credit card. 

At the end of the day, when deciding which loan to go for – it all comes down to your own individual circumstances and financial situation. Here are some of the pros and cons of each option to help you make a more informed decision:

Payday or fast cash loan:

Unsecured personal loan:

Credit Card:

Learn more about credit cards and read user reviews here!

With the introduction of peer-to-peer (P2P) lending in Australia, the personal loans market has become very competitive, even for lower loan amounts.

The question is, do you go with a reputable, established bank, or should you turn directly to an investor for some P2P lending?

Let’s break down the key differences:

REMEMBER: At the end of the day you should choose a lender that can give you the best overall deal for your particular circumstances.

• Loan term: This refers to the duration of the loan – A.K.A. how long you have to pay the lender back! The personal loan term you opt for will depend on your budget/financial situation and the regular repayment amount you can afford to commit to. Payday loan terms typically range between just 16 days to one year – so it’s imperative to only borrow within your means. Crunch some numbers with our personal loan repayment calculator.
• Interest rate types: There are two types of personal loan interest rates – fixed and variable. With a fixed-rate personal loan, the rate is locked in for the term of your loan. With a variable-rate personal loan, however, the interest rate could change throughout your loan term according to the market interest rate movements. In 2013, the Government introduced tough regulations around payday loans, capping interest rates at 4% a month. If you do the maths, this works out to be 48% over a year!
• Flexibility: Look for a loan that offers flexible repayment features – like the choice between weekly, fortnightly or monthly repayments to suit your schedule or the ability to make extra repayments if you can afford to. Making extra repayments or changing the frequency of your regular repayments could help you save on interest.
• Fees & charges: Short-term personal loans can often come with a range of fees, including application fees, set-up fees, monthly and/or annual fees, late repayment fees and charges for paying off the loan early.

Nowadays, payday loan applications are generally done online. You’ll generally need to provide the following information and supporting documents when applying:

• Proof of identity, e.g. driver's licence, passport or Medicare card
• Recent payslips, including Centrelink payments
• 90 days of statements for the bank account your income (including Centrelink payments) is paid into
• Utility bill confirming your address
• You'll also need to be at least 18 years old

Often, with a short-term loan, the borrower can find themselves paying more in fees, charges and interest than what they actually borrowed in the first place! So, payday loans are typically a last resort option. 

Here are some alternative ways to score some extra cash before opting for a payday loan:

• Sell some unwanted gear on eBay
• Pick up some casual work, e.g. waitress, bartender or customer service work that can be done from home
• Pet sitting/dog walking
• Babysitting/house-sitting
• Coach a local sporting team
• Tutor university or school students in your field of expertise

Short-term personal loan lenders can sometimes be more lenient than banks when it comes to your credit rating. Some payday loan providers even accept borrowers with poor credit ratings, which effectively causes the borrower to spiral into even more debt.

When applying for a personal loan, however, pretty much all lenders will check your credit rating. Here are some tips to keep a strong credit rating:

Here are some tips to keep a strong credit rating:

1. Pay your bills on time: It’s a no-brainer, but pay your bills on or before the due date
2. Meet your loan repayments: Don’t bite off more than you can chew! 
3. Don’t max out your credit card: As tempting as it may be to pull out the plastic, keep your credit card balance as low as possible
4. Reduce your debt/credit ratio: The lower the ratio, the better your credit.

Useful guide: Personal loans vs credit cards