Personal Loans for Single Parents

If you're a single parent in need of credit, there are several loan options available. You could apply for a standard personal loan or a short term loan. The type of loan you can apply for will depend on your income and credit score. While the lending criteria for personal loans are more stringent, they may be cheaper than short term loans.

What type of loans can I apply for as a single parent?

This will depend on your credit score and income level.

If you earn more than $15,000 p.a. and have a good credit score, you may be able to apply for a personal loan. These loans give you access to funding that you can use for any worthwhile expense.

The borrowing limits are typically higher than short term loans. Some personal loans allow you to borrow up to $50,000 unsecured. You may be able to borrow more if you opt for a secured loan and use an asset as collateral.

While these loans advertise high borrowing limits, how much you can borrow will depend on your income. Lenders will only lend how much they think you can afford.

Short term or payday loans require you to earn at least $300 a week to qualify. They generally have smaller borrowing limits and shorter terms. Most short term loans allow you to borrow up to $2,000, although there are medium term loans of $5,000 and $10,000.

Payday lenders generally have a more flexible lending criteria. Depending on the lender, there may be options for bad-credit borrowers. While these loans are comparatively easy to apply for, they cost more than traditional personal loans. For loans up to $2,000, no interest is charged but the fees are high. You will be charged an establishment fee of 20% of the loan amount and a monthly fee of 4% of the loan amount. You will also have a year at most to pay it off.

Will it be difficult to get approved for a loan as a single parent?

Single parents are judged the same as every other borrower, but there are obstacles single parents may face that other borrowers may not. For instance, as a single parent, you may rely on a single income. You will also be solely responsible for your debts. This means that you may have more trouble meeting lending requirements compared to dual-income borrowers or those without dependants.

Single parents may also receive Centrelink payments. But some lenders don't recognise it as a source of income. They may also be working part-time and may not meet minimum income requirements. Before applying for a loan, you should ensure you meet the lender's eligibility criteria. If you have any questions about eligibility, you should contact the lender first.

What's the minimum income requirement for short term and personal loans?

• Short term loans
• Personal loans

How do I know if I can afford a personal loan on a single income?

Before applying for any loan, you should consider using a personal loan calculator, like the one below. This will give you an idea of what your repayments may be. Keep in mind that this is only a guide and each lender will assess your borrowing power differently.

What can I use the loan funds for?

With both short term and personal loans, you can use the loan funds for any worthwhile purpose. With a personal loan, you can use it to do the following:

• buy a car
• pay for a holiday
• renovate your home
• upgrade your appliances
• pay your medical bills or emergency expenses
• consolidate consumer debt

Compared to personal loans, short term loans tend to cost more. As a result, you should avoid using them except in financial emergencies. They are not a long term financial solution and may exacerbate any financial difficulties.

If you have utility bills to pay, you should contact your service provider first. It may be able to work out a plan so you can pay your bills or fines in instalments.

You should also avoid using payday loans for everyday necessities. A longer-term credit solution may be more suitable in such instances.

Likewise, using payday loans to pay for existing debt may only add to your debt, given how expensive these loans are. If you have no other alternative, you can use a payday loan to pay for the following:

• Unexpected or forgotten bills or payments
• Financial emergencies, including medical emergencies or emergency car repairs.
• Unavoidable home repairs or purchases. If there are alternatives, such as zero-interest financing from retailers, you should consider them first.
• Unexpected expenses before payday. If you have no other alternative and you're short on funds due to an unexpected expense. It's important to remember that this is not a long-term strategy.
• Income bridge. If you're waiting on guaranteed funds to come through on a large payment, a short term loan may be an option.

You should avoid taking payday loans to pay for the following:

• Everyday necessities
• Repayments for existing debts
• Holidays
• Big-ticket items like cars
• Other non-essential expenses and purchases that can wait

Is a personal loan better than a short term loan?

Here's a quick breakdown of how personal loans compare to short term loans.

What should I consider before applying for a loan as a single parent?

There are a number of important factors to consider before applying for a loan. You need to ask yourself the following:

• How much does the loan cost? What does the loan cost when you add in interest charges and fees? For personal loans, it's important to consider both the interest rate and comparison rate. The comparison rate includes all the rates and fees, in addition to interest charges. Fees can include establishment and ongoing fees.
• Does it fit my budget? After you calculate the cost of the loan, you need to ask yourself if you can afford it. How does it fit in with your current budget? Will making repayments leave you out of pocket? You should only apply for a loan if it fits comfortably within your budget.
• Can I repay my loan within the given loan term? Once you've calculated its cost and affordability, ask yourself if you can repay the loan in the time given to you. If you fail to make your repayments, there may be high fines and even legal repercussions. If you've opted for a secured loan, the lender can also repossess your asset.
• Is the loan amount sufficient for my purposes? If you borrow too much, you'll be paying interest and fees on money you don't need. If you borrow too little, you won't be able to pay for what you need and may have to take out another loan.
• Is the loan flexible? This is an important consideration as it could affect your ability to manage the loan. Does the loan allow you to make weekly, fortnightly or monthly repayments? Does the payment schedule line up with your payment frequency or will you be left out of pocket?
• Are there extra loan features? Can you make extra repayments or repay the loan early? Are there penalties or fees for any extra features?
• What is the lender's reputation? This is particularly important when it comes to short term loans. You need to check if the lender is registered with ASIC. Look into how easy the lender is to contact. This is important in case there's an emergency and you need to contact them regarding repayments. If possible, you should also read third-party customer reviews of the lender.

You should also keep the following in mind when applying for a loan:

• 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. For short term loans, you could be charged up to 200% of what you borrowed. For unsecured loans, the lender can initiate legal proceedings against you if you don't repay the loan. For secured loans, your asset can be repossessed by the lender. The lender 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. Several applications within a short period can hurt your credit score. This can make it harder for you to get a loan in the future. Find a single loan you're eligible for and apply only for one loan product at a time.
• Getting into debt. Debt comes with responsibilities. If you can't meet your repayments, you should contact the lender as soon as you can. If you fail to do so, you may be charged late or default fees, which will lead to more debt. Your payment history will affect your credit score – for better or worse.

How can I improve my chances of getting a loan?

• Check your credit score and report. You can check it for free on Finder. This will tell you what kind of borrowing position you're in. The higher your score, the less risky you appear to the lender.
• Improve your credit score. If your score is less than perfect, there are ways you can improve your score. Apart from paying all your bills on time, working on your savings can help improve your chances of getting a loan.
• Get financial advice. You can get in touch with a financial counsellor for free. They can take you through your financial options. Give the hotline a call on 1800 007 007.
• Apply for a lower amount. You should only borrow as much as you need and can realistically afford. Instead of offering you a lower amount, lenders may reject your application if they think you can't afford the repayments.
• Talk to the lender before you apply. Discuss your eligibility with the lender before applying. Remember that every loan application will appear on your credit report. Too many applications in a short space of time will affect your credit score and chances of future credit.
• Offer loan security. By offering security, you're reducing the lender's risk of lending to you. This may make them more amenable to providing credit. Keep in mind that secured loans come with the risk of losing your asset. If you fail to make your repayments, the lender can repossess the asset to cover their cost of lending.

What are the alternatives to personal or payday loans?

If you're a single parent facing financing hardship, applying for a personal or a payday loan may not be the best answer. There are a few alternatives you could opt for. These include the following:

• 0% interest financing from retailers.Some retailers offer interest-free periods on the sale of their goods and appliances. For instance, The Good Guys offers up to 60 months interest-free on home appliance purchases with a minimum spend in-store or online.
• No Interest Loan Scheme (NILS). This loan is for low-income earners. It is offered by 170 local community organisations across 600 locations in Australia. You can borrow up to $1,500 to pay for bills and essentials, with terms ranging from 12 to 18 months. As the name implies, no interest is charged. You will only pay for what you borrow.
• Centrelink Advance Payment. This allows you to receive an advance payment on your Centrelink benefits. This is not an additional payment, but a part of your existing allowance paid in advance. You may be eligible depending on how long you have been with Centrelink and how much you receive. There are also other loans you can apply for if you're on Centrelink.
• StepUP personal loan. If your income is small, you could be eligible for a StepUP personal loan. This program is managed by Good Shepherd Microfinance in partnership with NAB. With this loan, you could borrow between $800 and $3,000, with a loan term of up to 3 years. The interest rate is fixed at 5.99% p.a.
• Buy now, pay later .You can make interest-free purchases and pay in instalments. Many retailers now offer this option, allowing you to break down your repayments into smaller, more manageable chunks. There are also buy now pay later services that let you pay your bills in instalments.
• Pay on demand apps. If you're out of pocket, you could look into pay on demand. This is a type of short term loan where you can borrow a portion of your pay cheque before your payday. You are technically borrowing your own money in exchange for a small fee. These fees can be from $2 to $10 or up to 5% of the total borrowed money. The idea of these loans is to tide you over until payday.
• Interest free credit cards. Another alternative is a 0% interest credit card. Keep in mind that after the introductory period, the interest rate reverts to the standard rate. When that happens, you'll be charged interest on the balance you haven't paid off during the 0% p.a. period.

How can I apply for a single parent loan?

👁 Compare lenders. 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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Written by

Matt Corke

Head of publishing and editorial

Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio

Co-written by

Bria Horne

Writer

Bria Horne is a writer for Finder, with a specialist knowledge of personal loans, car loans and business loans. Originally from the UK, Bria has been a professional personal finance writer in Australia for over 2 years. She has an M.A and B.A in Philosophy and Literature from the University of Sussex, and previously worked on the UK’s leading hospitality publication. See full bio