Short term loans vs rent to buy

If you need to make a large purchase but don't have the funds to do so, there are a number of options to choose from. Both short term loans and rent to buy arrangements will give you access to the item up-front then let you pay it off over a set term.

Compare the two below to see which one may be right for you.

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How do they work?

Short term loan

Also known as a payday loan, this is a type of personal loan that generally lets you borrow up to $2,000. You will need to repay the loan within a period of up to two years, but may be able to pay it off in full as soon as you wish.

Rent to buy

A rent to buy option lets you lease an item (such as a TV) over an agreed term, which you will then need to purchase at the end of the rental period. You get immediate access to the item but need to make regular rental payments, as well as a final payment to take ownership of the item.

You will pay less for the item up-front, but will generally pay more over the course of the rental period than if you were to buy the item outright.

Benefits and drawbacks

Which one is right for me?

A short term loan may be a better option if you need to borrow a specific amount of money to fund a purchase or if you are confident you will be able to repay the loan quickly. Payday loans have high interest rates and fees, and can become very expensive if you take a long time to repay the loan. You will generally also pay an application or establishment fee, which may rival the cost of the item itself.

A rent to buy option may be suitable if you want the stability of regular repayments and do not believe you will have the funds to cover the full purchase in the near future. However, you may end up paying over double the purchase price of the item, and will generally need to make a final lump sum payment at the end of the rental term.

Things to keep in mind

• Impact on credit score. Applying for a short term loan or rent to buy may be recorded on your credit history. This can affect your chances of getting approved for other loans in the future.
• Affordability. If you want to take out a short term loan or rent to buy a new TV or similar purchase, you should consider whether it is a necessary and affordable purchase. You will likely end up paying much more than the outright cost price of the item on both options, so it may be worth only using them to help with essential purchases.
• Alternative finance options. You may be able to save money by using another finance option to fund the purchase, such as a credit card or regular personal loan.

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Name	Product	Maximum loan amount	Term of Loan	Turnaround time	Arrears Fee	Costs	Fortnightly Repayment (for $1500 Loan)
Sunshine Short Term Loans		$2,000	9-14 weeks	30 minutes - conditions apply	$35	20% of loan amount + 4% of loan amount each month	$396	A small loan up to $2,000 that you repay over 9-14 weeks. Loans approved and funded in as little as 30 minutes.	Go to site More Info	Compare	loading Fetching your data...
Credit24 Short Term Loan		$2,000	6-12 months	Same day - conditions apply	$10	20% of loan amount establishment fee + 4% of loan amount monthly.	$396	Credit24 offers this loan up to $2,000 and gives you 12 months to repay.	Go to site More Info	Compare	loading Fetching your data...
Nimble Short Term Loan		$2,000	62 days to 9 months	1 hour - conditions apply	$15	20% of loan amount + 4% of loan amount each month	$372	A loan up to $2,000 with terms up to 62 days to 9 months. Centrelink cannot be your primary source of income.	Go to site More Info	Compare	loading Fetching your data...
Safe Financial Small Loan		$5,000	22 - 52 weeks	Same day - conditions apply	$35	Up to $2,000 - 20% establishment fee + 4% monthly. Above $2,000 - $400 + from 8.7% to 48% APR	$396	Borrow from $1,000 to $5,000 with same-day funding and no early repayment fees.	Go to site More Info	Compare	loading Fetching your data...
Fair Go Finance Small Loan		$2,000	3-12 months	1 business day	$35	Establishment fee 20% of loan amount + monthly fee 4%	$354	A small loan between $500 and $2,000 that can be funded in 24 hours.	Go to site More Info	Compare	loading Fetching your data...
Ferratum Cash Loans		$1,900	3 to 12 months	Same day - conditions apply	$55	20% of borrowed amount + 4% of borrowed amount each month	$396	Borrow what you need with loans starting from $500 and approval in minutes. Note: Apply for a loan and get paid out from 1 to 31 October 2020 to enter the raffle and get a chance to win weekly $250 vouchers or an iPad. Terms & conditions apply.	Go to site More Info	Compare	loading Fetching your data...

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Other options to consider

• Credit card. If you believe you will be able to pay off the item quickly, it may be worth using a credit card for the purchase, then paying off the balance on your card. Depending on your situation, you may be able to avoid the fees and costs associated with short term loans or rent to buy arrangements.
• Personal loan. A regular personal loan will generally offer lower rates than either a short term loan or rent to buy. You may be required to make regular repayments over a longer period or be charged fees if you pay the loan off early.
• Lay-by. Some retailers offer lay-by options; however, you will not get access to the item until you have completed your repayments.
• Interest-free loan. Retailers may also offer interest-free personal loans on expensive items such as a TV or fridge. You will be required to make regular repayments over a set term, but will not be charged any interest. However, some fees and charges may apply.

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