Short term loans are a financial ladder that can help you reach the things you want.
Short term loans can fill a gap between now and payday, especially if you have an instant need for cash. But are they safe?
Loans like mortgages and car loans are usually with you for a long time, but what if you just need a short term option? A short term loan is taken out by a borrower with the intention of paying it back quickly. They're becoming an increasingly popular option for Australians looking to borrow money and get the debt dealt with quickly.
Sunshine Short Term Offer
This is a short term loan offer with a fast and easy online application for bad credit borrowers who are employed. You can apply today to get approved for up to $2,000.
- Loan Amount: $2,000
- Loan Term: 9 weeks
- Turnaround Time: 30 Minutes - conditions apply
- Total Cost of Borrowing $100: 20% of borrowed amount + 4% of borrowed amount each month
- Bad credit borrowers OK
- Quick and easy Approval
- No Credit Checks - Must be employed
Short term loans comparison
Warning about Borrowing
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
The finder.com.au short term loan comparison
Compare the features of the short term loans below.
|Payday Loan||Loan Term||Maximum Loan Amount|
|10 weeks or 3 months||$2,000|
|Up to 6 mths||$1,900|
Reasons you might need a short term loan
People choose to get short term loans for a variety of reasons, including;
- To pay for unexpected or forgotten bills or payments
Sometimes bills can pile up and it's not until the reminder letter comes from the utility company that you remember you haven't paid. If your bill is severely overdue then it could disrupt your service supply. If you have spoken to your provider and can't get an extension, a short term loan may fill the gap.
- To cover expenses until payday
If you get paid monthly or even fortnightly, then you may find that you are short on funds for one of two days or even a week. If you can't make your funds last until payday, you could apply for a short term loan to help. Keep in mind that these loans come with a higher than normal repayment amount.
- To bridge an income gap when you are waiting on payment
If your employer is sometimes unreliable on your pay, or the payment is taking longer than expected to clear then a short term loan could be used to pay for the necessities before your pay money hits your account.
- To pay for shopping or a holiday
Sometimes you just need to get away from the hustle and bustle but not have the money to make it happen. If you have a prepared a budget and want to take a holiday but don't want to go through the hassle of saving, a short term loan could make your vacation come sooner.
- To pay for something when you don't want to or cannot use a credit card
It's no secret that retailers love cash and you can often pick up items at a significant discount if you choose to pay with cash over plastic. You can also use cash at garage sales and 2nd hand stores to snap up bargains.
Types of short term loans in Australia
People use short term loans for a variety of purposes and as such there's a few different types of loans that you can consider.
- Payday loan
A payday loan is intended to be used as a short term loan solution for people who want to repay this loan using their next paycheque. The loan amount, which can be as high as $1500 or as low as $100, is usually based on your income and current financial situation and so is an option for people with bad credit. The repayments are usually based on your pay frequency and loan amount. However, please be mindful that payday loans have a short repayment period and if you can't make the repayments then it does appear on your credit history.
- Bad credit short term loan
Some lenders offer short term loans with no credit check. These lenders focus on your current financial situation and your ability to pay back the loan when deciding whether to lend to you or not. These loans are often restrictive in terms of the loan amount, the loan terms and the repayment flexibility.
- Unsecured short term loan
An unsecured loan is a loan which does not require you to use assets such as a car or house as collateral. As such, the eligibility requirements are a lot stricter because the lender is taking on a bigger risk and will get nothing if you default on your loan. Unsecured loans usually offer a minimum loan term of one year.
- Secured short term loan
Secured short term loans involve you agreeing to let the bank repossess a large asset, like your house or car, if you default on your loan. These loans pose minimum risks to the lender but are very risky for you as the borrower, as you may lose the asset you put up as security.
- Short term debt consolidation loan
A debt consolidation loan is a type of loan intended to move all of your debts into one easy to manage account. It acts as a personal loan with limited fees and a low interest rate. You may opt to move your credit card debt to a debt consolidation loan as the interest may be significantly lower, savings you money and helping you to pay off your loan sooner. If you have a bad credit rating and need to consolidate a range of debts, there are a number of companies that can help. A short term loan could help, but it is worth comparing your options
What are some of the considerations with a short term loan
- Is there flexible lending criteria?
As these loans are short term there is less of a risk to the lender, making the lending criteria more flexible than longer term loans.
- What are the available loan amounts?
The loan you are approved for depends on your current financial situation and can be quite flexible depending on the lender and type of loan.
- Are there bad credit options available?
Short term loans are also open to people who have a bad credit history, but this of course depends on the lender.
- What are the repayment options like?
There are varying repayment options available with short term loans which gives you more possibility of saving through flexibility. You could pay monthly, or if you are trying to save on interest you could choose to pay in fortnightly installments.
- What are the loan terms like?
Short term loans can range in terms from 2 weeks up to 1 year. It's important to calculate whether or not you can afford the repayments before applying. Use of a payday calculator could help and the services of a personal loan calculator could also.
- What are the interest rates available?
The convenience offered by short term loans come with increased interest amounts, with some reported to be as high as 48% of the principal loan amount for monthly repayments.
- How much will you pay in administration fees?
While lenders are restricted as to what fees they can charge, some are allowed to attach high fees onto short term loans.
- Are you paying a high repayment amount?
Because the loans are short term, if you borrow a large amount your repayments will be higher in order to pay the loan off in time.
- What is the lenders reputation like?
The short term loan space in Australia has been heavily regulated by the government in the past few years, however it is always important to research your lender before applying.
Case study: Sarah and her mechanic
Sarah has found herself in a difficult situation. It's one week before Christmas and her car breaks down on the way to the shops. She doesn't use her car often — mainly to get places on the weekend — so it wouldn't normally be an issue. Trouble is, she needs her car to go see family on Christmas day in rural WA and so she can't wait until she gets paid the following week to have it repaired.
The car repairs will cost her $450, her credit card is maxed out and she needs to pay the mechanic as soon as possible. She considers her options and finds that a short term loan will be able to best meet her needs. She'll be paid at the end of the month and easily be able to repay her loan.
Questions you might have had about short term loans
There's no shortage of misinformation about the range short term loans in Australia. If you have a question, please feel free to leave a comment below.
How long is a short term loan really for?
Short term loans can last anywhere from 16 days up until a year. It is important to work out your budget and set you repayment schedules based on your pay cycles.
Do I need to put up any collateral?
There are many unsecured bad credit lenders in Australia, but did you know that you can increase your chances of being approved by using an asset of value against your loan. If you can't make the repayments, you give the lender authority to take your collateral as payment for the outstanding loan amount.
Could I use my credit card instead or even an overdraft?
There are a range of pros and cons of using your credit card or an overdraft as a short term solution for a quick cash advance. It's important realise the difference in interest charges and the repayment options on credit cards. Find out how you can use both in our guide. With an overdraft your account goes into arrears and then charged interest on this amount. By using a short term loan, you know what your repayments will be and when they need to be paid.
Could I use a short term loan as a deposit for another form of financing?
There are many car loan leases in the market that require a deposit for your finance to be secured. Sometimes borrowers use a small amount to secure a deposit for the car financed from the bank and then refunded through the finance amount. It is wise to consult a financial planner before considering such options.
Can I use a bad credit short term loan to build my credit rating?
Any form of credit is listed on your credit file as an enquiry, including bad credit loans. If you keep up with your repayments and manage to pay the loan off, this could have a positive impact on your credit file. If you are worried about the impact of short term and payday loans on your credit file, this guide might be helpful.
Why do I have to give my internet banking details?
When you apply for a loan, you are required to show the lender that you get paid regularly and can service the loan repayments. In the past this was done by printing off your bank statements and faxing them in. Since technology has now progressed, there is software that allows you to login and provide these electronically to the lender. These systems are 100% secure and are done over a 128-bit encryption.
Can a business use a short term loan?
In a perfect world, suppliers pay their invoices on or well before the due date. However, most of the time, this does not happen and you spend time chasing up missing payments. If you can't wait for clients to pay you, there could be another option. If your invoice cycle is 60, 90 or 120 days a short term loan could help you manage your cash flow, until the invoices get paid.
Should you really apply for a short term loan?
When deciding whether to apply for a short term loan you need to consider your overall financial position. Are you borrowing money to pay off other debts? This could be a dangerous practice and has the potential to lead you down a dangerous spiral of debt. Think about whether you will be using this loan to pay off long term recurring expenses such as everyday living expenses, because this can be a dangerous practice and one that will see you add to your debt. You need to consider your current debts and your ability to realistically pay back the short term loan.