personal-loans-vs-cash-loans

Personal loans vs payday loans

Find out the difference between personal loans and short-term loans and learn which is best for you.

There is a wide range of loan options available to those who are in need of money. Each type of personal finance is suited to a different type of borrower and can be used for different purposes, and this includes personal loans and online cash loans. In this guide we break down the key differences between the two, outline their costs and help you determine which will be the best loan for your needs and situation.

Payday loans Personal loans
  • Can be a small loan (below $2,000), medium loan ($2,001-$5,000) or a large loan (over $5,000)
  • Usually unsecured
  • Come with higher interest rates and fees when compared to personal loans
  • Loan amounts differ, but you can usually find lenders offering between $5,000 and $100,000
  • Can be secured, unsecured or as a line of credit
  • Interest rates differ depending on whether security is offered, but they usually range between 5% and 16% p.a.

Learn about more of the differences in fees and features in the guide below the table.

Compare payday loans and personal loans

Rates last updated August 16th, 2018
Name Product Max. Loan Amount Term of Loan Turnaround Time Costs Fortnightly Repayment $1,500 Product Description
Sunshine Short Term Loans
$2,000
9-15 weeks
30 minutes - conditions apply
20% of loan amount + 4% of loan amount each month
$396
Apply online with Sunshine Loans and you could borrow up to $2,000 paid directly into your account. Note: Centrelink must not be your primary source of income.
Wallet Wizard Smart Loan (Up to 2K)
$2,000
Up to 2 years
3 hours - conditions apply
47.8%
$316.70
Apply for up to $2,000 as a convenient line of credit.
Nimble Short Term Loan
$2,000
62 days to 1 year
1 hour - conditions apply
20% of loan amount + 4% of loan amount each month
$396
Apply for up to $2,000 and have 62 days to 1 year to repay. Note: Centrelink must not be your primary source of income.
Credit24 Short Term Loan
$2,000
6-12 months
Same day - conditions apply
20% of loan amount establishment fee + 4% of loan amount monthly.
$396
A loan with a quick turnaround time and generous loan term. To be eligible, Centrelink must not be 50% or more of your income.

Compare up to 4 providers

Rates last updated August 16th, 2018
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Product Description Monthly Repayment
Citi Personal Loan Plus
From 8.99% (variable)
9.96%
$5,000
3 to 5 years
$10
$199
Borrow up to $75,000 to use for a range of purposes. You’ll receive a rate of between 8.99% p.a. and 17.99% p.a. depending on your risk profile. (Comparison Rate of 9.96% p.a. to 18.91% p.a.)
ING Personal Loan
8.99% (fixed)
9.13%
$5,000
2 to 5 years
$0
$100
Benefit from no ongoing fees, no early repayment fees and flexible loan terms on amounts up to $30,000.
SocietyOne Unsecured Personal Loan
From 7.5% (fixed)
9.51%
$5,000
2 to 5 years
$0
3% (of loan amount)
Based on your risk profile, you will receive a tailored rate between 7.5% and 20.49% with a SocietyOne personal loan.
Latitude Low Rate Personal Loan (Unsecured)
10.99% (fixed)
12.21%
$20,000
2 to 7 years
$13
$250
A low rate unsecured personal loan you can repay over terms of 2- to 7 years. Only available to homeowners.
NAB Personal Loan Unsecured Variable Rate
Headline rate 12.69% (variable)
13.56%
$5,000
1 to 7 years
$10
$150
Based on your risk profile you will receive a tailored rate between 10.69% p.a. and 18.69% p.a. (comparison rates between 11.58% p.a. and 19.53% p.a.)
Sydney CU Special Offer Unsecured Personal Loan
From 7.99% (variable)
7.99%
$5,000
1 to 5 years
$0
$0
An unsecured personal loan with a special offer low introductory rate and no annual or monthly fees.
Harmoney Unsecured Personal Loan
From 6.99% (fixed)
7.69%
$5,000
3 to 5 years
$0
$500 (Upfront fee)
Interest rates are tailored to each applicant individually, and start from as low as 6.99% p.a. to 26.95% p.a.. based on your credit history.
HSBC Personal Loan
From 9.5% (fixed)
10.06%
$5,000
1 to 5 years
$5
$150
A competitive fixed interest rate loan with the option to make extra repayments. Rates range from 9.5% p.a. to 15.99% p.a. based on your credit history.
RateSetter 3-Years Personal Loan
From 7.17% (fixed)
9.72%
$2,001
0.5 to 5 years
$0
$220
RateSetter offers loans with terms ranging from 6 months to 5 years and comparison rates from 6.39% p.a. - 11.08% p.a. based on your risk profile.

Interest and comparison rates calculated for a 3-year loan term.
NOW FINANCE Personal Loans
From 7.95% (fixed)
9.56%
$5,000
1.5 to 7 years
$13
$395 (Based on $10,000)
Get rewarded with a low interest rate for your good credit history. Rates from 7.95% p.a. to 16.95% p.a. depending on your credit score.
Latitude Personal Loan (Unsecured)
From 13.99% (fixed)
15.19%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
An unsecured loan with a tailored rate from 13.99% p.a. to 29.99% p.a. designed for multiple purposes including renovating, buying a car or travelling.
Pepper Money Unsecured Fixed Rate Personal Loan
From 9.99% (fixed)
9.99%
$5,000
1 to 7 years
$0
$0
Apply for up to $50,000 and receive conditional approval within minutes. Interest rates range from 9.99% p.a. to 21.74% p.a. The rate you are approved for depends on individual circumstances.
CUA Unsecured Fixed Rate Personal Loan
11.99% (fixed)
11.99%
$5,000
1 to 7 years
$0
$0
Apply for a loan up to $60,000 and keep repayments manageable with a competitive fixed rate.
MyState Unsecured Personal Loan
12.99% (variable)
16.42%
$3,000
1 to 7 years
$10
$200
Apply for up to $50,000 and make additional repayments at any time without penalty.
Westpac Unsecured Personal Loan
12.99% (fixed)
14.14%
$4,000
1 to 7 years
$12
$250
A competitive, fixed rate personal loan that allows you to make extra repayments.

Compare up to 4 providers

What's the difference between personal and payday loans?

There are several key differences between personal loans and short-term cash loans:

  • Loan amount. You can borrow up to $5,000 from many cash lenders, and some offer loans as high as $10,000. Personal loans come with much higher minimum and maximum loan amounts, with lenders rarely offering loans below $5,000 but having maximum amounts as high as $80,000-$100,000.
  • Eligibility. Personal loans offered by banks and credit unions have strict eligibility criteria that often includes good credit and a regular income from employment or above a certain amount. Cash lenders that offer short-term loans are much more flexible and will consider those with bad credit, those who receive Centrelink payments as income or people who are unemployed.
  • Lenders. Personal loans are offered by banks, credit unions, building societies and standalone lenders. Cash loans tend to be offered by lenders specialising in that type of product.
  • Loan term. Cash loans come with much shorter terms, usually between 16 days and one year (depending on the loan amount). Personal loans, on the other hand, come with a minimum loan term of one year and a maximum of between five and seven years.

What is the cost difference between a personal loan and a short-term loan?

Online cash loans are heavily regulated by ASIC and lenders are restricted as to what fees and rates they can charge. Personal loans do not have such restrictions as long as they are offered by an Authorised Deposit-taking Institution such as a bank or credit union.

Payday loan costs
  • Cash loans under $2,000 with terms of between 16 days and one year cannot charge more than a 20% establishment fee and a 4% monthly fee.
  • Cash loans between $2,001 and $5,000 with terms of between 16 days and two years are restricted to a $400 establishment fee and an interest rate of 48% p.a.
  • Cash loans over $5,000 or with terms longer than two years cannot exceed an interest rate of 48% p.a., which includes all fees and charges.
Personal loan costs

How can I decide which type is right for me?

While there are similarities between these two products, there are stark differences as well. Asking yourself the following questions will help you decide which type of loan is right for you:

  • How much do you need to borrow? Personal loans allow you to apply for a much larger loan amount, while cash lenders usually have maximum amounts of $2,000 (although some lenders will provide loans of up to $10,000).
  • When do you need the money? Cash lenders offer a quick turnaround for your loan and can have your approved funds in your bank account within the next business day. Some personal loan lenders offer same-day turnaround for existing customers but the usual waiting time is a few days to a few weeks.
  • How is your credit history? Online cash lenders have more flexible eligibility criteria than lenders offering standard personal loans. You may still be able to apply for a cash loan if you have bad credit or a low income. Personal loans come with more stringent eligibility criteria. The majority of personal loan lenders will require you to have good credit and will usually have a minimum income requirement to show you can repay the loan.
  • What can you afford to repay? Short-term cash loans come with much higher rates and fees, meaning higher repayments. Your loan will be repaid in a shorter period of time but you need to determine your ability to afford the repayments. Personal loans come with lower rates and fees, and while they are spread over a longer term, they may make for more manageable repayments.

Picture: Shutterstock

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