Finance options to help your cashflow

1 December 2016

Sooner or later, we all get caught short. Whether it’s because of an unexpected expense, surprise bill, or additional cost, occasionally what we’ve budgeted for isn’t quite enough.

Often this happens at the most inconvenient time, and with no time to spare.

You may be moving house and have forgotten to set aside funds for exit cleaners. Or you could be on the side of the road with a flat, needing money for a new tyre. It happens.

What do you do at these times? Well, there are finance services which cater for these and similar scenarios. Here are five options from which you can potentially choose (although please note that we don’t advocate you getting into more debt that you have to!)

Personal overdrafts

A personal overdraft is a service offered by the big four banks and some smaller institutions. It allows you to overdraw on your bank account up to an agreed limit.

So, for example, if you’re down to your last $20 and you’re hit with emergency dental costs due to an inflamed molar, you can overdraw your account to cover the shortfall.

You then repay back the overdrawn amount like how you would with a credit card; in installments with applicable interest rate costs and a monthly fee.

However, also like credit cards, if you have not already set up personal overdrafts then doing so can be time consuming. And again, there is the temptation to reuse such a service.

Pros May have a comparatively low interest rate
Often no fees if you do not use your overdraft
Cons Can take time to acquire
Might be tempting to use again (and again)

Credit cards

Credit cards are the most common solution for covering unforeseen expenses.

Many Australians already own one. In fact based on the most recent Reserve Bank statistics, there are currently around 16.7 million credit cards on issue in Australia. On Canstar’s database, credit card interest rates vary from 0% per annum for some balance transfers, right up to ongoing purchase rates of more than 23%.

The limitations of credit cards are that if you don’t already own one, obtaining one can take anywhere between two days and a week, which may not help you if you need cash fast.

Also, once you’ve gotten a credit card, it can be tempting to use it again and again. And, if you’re on a tight budget, it could be a temptation which you can live without.

Pros May be able to find a credit card with a competitive interest rate
Popular among Australian consumers
Cons Can take time to acquire
Might be tempting to use again (and again)


Cash loans

Short term cash loans, also known as payday loans, are a finance product designed to provide you with quick access to small cash amounts, usually $250 – $1,500.

Cash loans are different to personal loans in that they do not charge interest. They instead charge flat fees, such as an establishment fee and an ongoing monthly fee.

The main benefit of these types of loans is that they are fast. In some cases, your loan can be approved and the funds deposited in a couple of hours.

The downside is that cash loans are more expensive than credit cards and personal loans. Fees can be up to 20% of the principal and 4% per month.

Pros Fast approval and transfer
Simple fees instead of interest
Cons More expensive
Up to 20% of principal setup fee

Payment plans

This option will not be available for all situations, as not all businesses offer payment plans. However, many electronics, tyre, and automotive outfits do.

Typically, these plans involve the business issuing you with a credit card, which is then used for the purchase of their product or service.

The benefit of these payment plans is that they can be arranged all in store without the need for you to visit a bank or lender. You provide the business with your details and they handle the credit application, finance approval, and similar paperwork.

The drawback is that while these plans often offer interest-free periods, they are not always cheaper overall. Also, as you are being issued with a credit card, these plans feature all the downsides associated with this form of credit – See Credit cards.

Pros Fast application and approval process
Can all be arranged in store
Cons Same drawbacks as credit cards
Interest free options not always cheaper

Personal loans

A personal loan is a form of finance where a lender provides you with funds in exchange for regular repayments and interest. Unlike a car loan or home loan, the funds borrowed are not for a specific product or service. They can be used for whatever you choose.

As loans of this type are generally used for smaller amounts, the application process can be faster. Approval can, in some cases, be arranged same day.

Interest rates can be variable or fixed. Although they are, in many cases, higher than those associated with credit cards. Standard loan fees may also apply.


Pros Fast application and approval
Choice of fixed or variable interest rates
Cons Interest rates may be higher
Loan fees can apply

About the Author

Club Money provides Australians with short term cash loans. If you need a little extra to cover an unforeseen expense their professional team may be able to help you.


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