Sometimes moving house may not coincide with funds in your bank account. If you're wondering how to pay your rental bond, there are several loan options available. These include personal loans, short term loans and government assistance loans. Make sure to compare loans and fees to ensure you can afford to repay the loan.
What is a rental bond?
A rental bond acts as a security deposit for the property you're renting. This deposit is held for the duration you rent the property. It will be paid back to you when you move out, granted there is no damage to the property. If there is damage, all or part of the deposit will be used to pay for the repairs. Rental bonds vary, but they are usually 4 weeks of rent.
Although you will receive your deposit back from the old rental, this won't always coincide with the deposit you owe for the new place. Additionally, if there are damages, it may be less than the full amount you thought you would receive. There may also be disputes, which will take time to settle.
Sometimes you may find that you're stuck for cash but need to pay the deposit to secure the new rental. In such instances, a rental bond loan can help bridge the gap.
What rental bond loans are available?
There are a number of options available, but you may not qualify for them all. It's a good idea to look into which of these loans you're eligible for before applying for finance.
- Personal loans. Some lenders offer same-day personal loans if you're in need of quick funding. Interest rates on personal loans tend to be lower than rates for credit cards or short term loans. Their terms are generally longer, starting from 1 year. Repayments can also be made to suit the regularity of your income. The lending criteria is usually strict and you will need to meet the credit and income requirements.
- Short term loans. These are also known as payday loans. These loans are usually between $100 and $2,000, although you can get loans for $5,000 and $10,000. The loan terms are short, from 16 days to 1 year at most for $2,000 loans. The lending criteria is comparatively flexible. You can find loans which accept bad credit applicants and Centrelink recipients. However, these loans are expensive and come with high fees and charges.
- Government assistance loans. Some state governments offer rental bond loans for applicants with lower income. These loans are offered without interest and are designed to help people access private housing. We've outlined state-specific government loans below.
Government assistance schemes
- Queensland. The Queensland government offers bond loans to applicants who meet a specific set of criteria. You need to be an Australian resident, not own property and have less than $2,500 in cash or savings between all the applicants.
- New South Wales. You can apply for the Rentstart Bond Loan if you meet the eligibility criteria for social housing and a cash assets limit.
- Victoria. The RentAssist scheme by the Victorian government requires that your share of the rent is less than 55% of your gross weekly income. You also cannot apply if you own or partly own a house, apartment or unit.
- Tasmania. While the Tasmanian government doesn't have a scheme in place, rental bond assistance is available from AnglicareTas.
- Northern Territory. You need to meet residency, age, income and asset tests to be eligible for an interest-free loan from the Northern Territory government. Generally, those on low incomes can apply.
- Western Australia. The WA Housing Authority provides bond assistance and 2 weeks' rent in advance as an interest-free loan to eligible applicants.
- Australian Capital Territory. If you're in ACT and have no available cash or convertible assets above $10,000, you may be eligible for a Rental Bond Loan from the Community Services Directorate. Keep in mind that income tests and other criteria apply.
- South Australia. If you need help paying your bond in South Australia, you can consider PR Connect for a bond loan. The total rent on the property cannot be more than $450 a week. Other criteria apply.
How can I compare rental bond loans?
When you're looking for a loan, it may be tempting to apply for the first loan you find. However, by comparing loans, you'll be able to find a loan that suits your financial circumstances and doesn't cost the earth. Before applying, you should make it a point to read reviews and online testimonials. When comparing loans, you should watch out for:
- Rates and fees. You should make note of all fees and charges and add them to your calculations. Apart from the interest rate, you should also consider comparison rates. The comparison rate will give you an indication of the true cost of the loan. It includes interest and other fees like establishment and ongoing fees. All these fees add to the cost of your loan. Make sure the loan you're applying for is affordable and can sit comfortably in your budget. If it doesn't, you might want to consider a cheaper alternative.
- Loan term. Loan terms are how long you have to repay the loan. Longer loan terms mean lower monthly repayments. But you also end up paying monthly fees for longer. All these costs add up and make the loan more expensive. You should also only apply for a loan if you can repay it within the agreed loan term.
- Loan amount. All loans come with minimum and maximum loan amounts. You need to ensure the loan you're applying for covers how much you need. Don't apply for too much and don't apply for too little.
- Repayments. Your repayments will be structured around the income you receive. This can be weekly, fortnightly or monthly. Some lenders will allow you to repay the loan early. This can help you save on fees and charges.
- Turnaround. If you need the funds fast, you should consider how long lenders take to deposit the money in your account. Some can issue funds within 30 minutes or a few hours, while others can take longer.
What are the risks of payday loans?
- High fees and charges. Short term loans of $2,000 or less don't include interest. Rather, they have a hefty fee to cover the cost of borrowing. There are also fees for late payments. These fees are regulated by ASIC and it's illegal for lenders to charge more. You should ensure you can repay the loan with ease before applying.
- Short terms. As the name implies, these loans come with short terms of up to 12 months. If you don't repay the loan within this period, you could incur default fees, which can be up to 200% of what you borrowed.
- Inflexible loan terms. Most lenders will ask you to repay the loan on the next payday. They could deduct the funds directly from your account.
- Disreputable lenders. Check the lender's website and make sure it's a reputable company. You should ensure it is registered with ASIC. It should also be easy to contact.
- Long-term repercussions and legal issues. Once you sign a loan agreement, you are bound to its conditions. You will have to pay the loan and all the fees and payments. Typically, these are unsecured loans. This means the lender can initiate legal proceedings against you if you do not repay the loan. It can also report the debt to a credit reporting body like Equifax and use the services of a debt collector.
- Multiple applications. Every loan application shows up on credit reports. Some short term lenders may not consider your credit history. But several applications within a short period can have a negative impact on your credit score. This can make it harder for you to get a loan in the future.
- More debt. Given how expensive these loans are, they could potentially lead to more debt if you can't meet your repayments. Late or non-repayments could result in more fees; this has the potential to spiral out of control.
How can I apply for a rental bond loan?
👁 Compare lenders and loans. Look at the fees, terms and eligibility criteria and find a loan that suits you.
🔍Once you've settled on a lender from the table above, click "Go to site" to visit the lender's website.
✍You can submit an online application. Keep all the documents required handy. This will speed up the process.
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