Small personal loans: how much can I borrow?

Small personal loans can help cover the cost of purchases that are bigger than what you’d usually spend day-to-day. You may not have or want to use the cash in your savings to make the purchase, or you may simply want to spread the cost to make it more manageable. Whatever the reason, a small personal loan could help you reach your financial goals and keep life moving. 

Small personal loans work in just the same way as any other personal loan. You borrow a fixed amount from a lender, then repay it in regular instalments, plus interest, until the end of your loan term.

Want to know more? Dig into our complete Smart Guide, What is a personal loan?

No, they’re not the same thing. A payday loan (or short-term loan) is any loan that’s less than $2,000 and is repaid over from 16 days to 1 year. Payday loans come with very high interest rates and the debt can build up quickly. It’s really important that you fully assess all your options before taking on a payday loan as they can easily become a debt trap.

Right then, how small really is small? Well, this will depend on the lender. Here at Wisr, we offer unsecured personal loans from just $5,000 and secured vehicle loans from $10,000. 

In Australia, it is possible to find lenders that will offer loans for smaller amounts. However, if you’re looking to use a loan for a purchase under $2,000, you may want to explore if you have any other more suitable options available to you first. More on that later.

Pretty much anything! Here at Wisr, we allow borrowing for any worthwhile purpose (as long as it’s legal). Popular uses of personal loans include:

• Buying a new or used vehicle

• Consolidating debts

• Renovating your home

• Paying for a wedding

• Covering travel expenses 

• Buying household appliances

• Funding medical procedures

The interest rate you’re offered on a small personal loan will come down to your credit score. The stronger your credit score, the more likely you’ll be offered a low rate personal loan. On the flip side, the weaker your credit score, it’s more likely that you’ll be offered a higher interest rate. 

To give yourself a clearer idea of what your interest rate and monthly repayments might be, you can use our personal loan calculator. This can be a good way to set your expectations before you go ahead and get your personalised rate estimate. 

Looking to reach a new goal? Taking out a small personal loan could give you the funds you need to make your plans a reality. Here are a few benefits of small personal loans.

• Making consistent loan repayments can improve your credit scores over time

• Borrowing a smaller amount may mean that you’re able to repay the full loan quicker

• Opting for a loan over using savings could help make sure that you still have an emergency fund if something unexpected happens

• Fixed monthly repayments make it easier for you to plan ahead and budget

All forms of borrowing come with considerations that you’ll need to weigh up before making  a decision.

• Missing a repayment or defaulting on your loan can negatively affect your credit scores

• If you only need to borrow a very small amount, there may be more suitable options available 

• Smaller loans can come with slightly higher interest rates

Not sure if you should be looking at a small loan or using a credit card? Let’s take a look at their key features to help you get a better idea of what each credit product is best suited to. 

Small personal loans

• For one-off purchases 

• Borrow a fixed amount which is repaid in regular instalments, plus interest

• Fixed monthly repayments until the loan is paid off

• Can be used for debt consolidation, as well as big purchases 

• Interest rates tend to be lower than on credit cards

Credit cards

• For ongoing spending

• Borrow within a credit limit and if repaid, you can borrow the amount again

• Can repay in full or make the minimum monthly repayment 

• Interest charged if balance is carried over into the next month

• Can’t be used for debt consolidation 

• Interest rates tend to be higher than on personal loans

Want to learn more? Check out our guide to personal loans vs credit cards.

Yep, there are a few different borrowing options out there! Aside from personal loans and credit cards, here are some other ways you could borrow or access a smaller amount.

• Line of credit: a line of credit loan is sort of like a hybrid between loan and a credit card. You can access an amount up to a fixed limit and once repaid it will be available to you again (a bit like a credit card). 

  You’re usually only charged interest on the amount borrowed and the money is made available through your transaction account. How much you’re able to borrow is more akin to traditional personal loans, however interest rates tend to be higher.

• Buy Now Pay Later: or (BNPL) is a type of short-term finance that can allow you to spread the cost of purchases over a few weeks. You usually won’t pay interest on your BNPL monthly instalments, which could make it a good option if you just want to make the cost of a small or medium-sized purchase easier to manage. However it’s worth noting that there can be large late fees if you miss a payment.

• Overdraft: an overdraft gives you access to funds via your transaction account (aka the bank account you use for day-to-day spending) up to an approved limit. It essentially allows you to keep spending after your account has got to $0 without incurring any big fees. Interest is usually charged on the amount borrowed until it is repaid. 

  Note: Not many of Australia’s big banks still offer personal overdrafts, so this may not be an option with your current provider.

• Savings: only looking to borrow a very small amount? It may be worth trying to save up for your purchase to avoid paying interest. (Seen our handy Round Up feature that can help with saving a little extra each month? Check it out on Wisr App.)

• Friends and family: if you have a strong support network around you, you could consider asking a friend or family member to help you out so you can repay them over a time period that works for you both. Just make sure everyone is on the same page for this loan, while you might not need a full-on contract it can be really helpful to have the agreement in writing so there aren’t any relationship-ending misunderstandings later.

Think a small personal loan is right for you? Well, if you’re looking for an unsecured personal loan of $5,000 or more, a Wisr loan could be an option for you.

Your first step is to get a rate estimate. Here at Wisr, our rate estimate only uses a soft credit enquiry so it doesn’t affect your credit scores.

If you’re happy with your rate and the loan options available, you can then go ahead and apply. Just note that when you submit a loan application, there will be a hard credit enquiry as part of the assessment process. 

Want to check your loan options with Wisr? Get a quick rate estimate now to see if you’re eligible.