What are rental bond loans and how can I get one?

A rental bond loan can be an option to assist with your cash flow while moving house, although as with any loan, there are risks attached, and important factors to consider before taking one out.

Say you’re in the middle of moving from one rental property to another. You’ve found a new place you like and signed the lease, and now the one thing left to do is pay the bond. If your former landlord has not yet refunded your old bond, and you don’t have the cash on hand to pay your new one, you may be wondering about your options. A rental bond loan may be one possible option in this situation.

Rental bond loans can help you pay your bond and ease the process of moving into a new property, although like any loans, they come with risks attached, and if they are not managed appropriately, they can contribute to financial stress. If you’re thinking about applying for one, it is important to carefully consider the terms and conditions, as well as whether there is a different, more suitable option available to you.

Note that a number of state and territory governments around Australia provide assistance to prospective renters in the form of interest- and fee-free rental bond loans, so depending on your circumstances and eligibility, this may be a more appropriate option for you to pursue.

What is a rental bond?

A rental bond is an amount that you pay upfront after signing a rental agreement, acting as a form of security deposit. The amount of a rental bond is typically equal to around four weeks of  rent at the property, but this can vary depending on a landlord’s requirements.

If you are a tenant, once you have paid your bond, your landlord or real estate agent will typically be required to lodge it with the relevant tenancy organisation in a set period of time. However, in some parts of Australia, you may be able to lodge your own bond. In New South Wales, for example, tenants can lodge their bond directly with NSW Fair Trading through the Rental Bonds Online (RBO) service.

A rental bond will be held for the entire time you are a tenant at the property, and will be repaid to you when your rental agreement ends, assuming there is no damage to the property. If there is damage, all or part of the bond can be used to cover repairs.

In addition to a rental bond, you may typically also be asked to provide two weeks of rent payments upfront upon signing a lease, but again, this can vary, depending on a landlord’s requirements.

What is a rental bond loan?

A rental bond loan is a form of personal loan that can be taken out by people who need to move into a new rental property and require financial assistance to pay for their new bond upfront.

If you are a tenant and decide to take out a loan to pay your rental bond, you will then pay the balance of the loan back to your lender as well as interest, typically in instalments.

Where can you get a rental bond loan?

There are a variety of lenders that offer personal loans. Most major banks and financial institutions will offer them, provided you meet the lender’s eligibility criteria. Alternatively, you may choose to speak with a personal loan broker.

Most banks and financial institutions will allow you to apply for a loan online or in person in a branch, depending on your preference and the availability of branches in your area.

Compare personal loans

What are your options when taking out a rental bond loan?

In general terms, your two main options when taking out a rental bond loan are a personal loan or a short-term loan.

A personal loan is a specific amount of money that you can borrow in order to pay for something. When you take out a personal loan, you will need to repay the balance, along with interest, over a set period of time, known as a term. Personal loans come with fixed or variable interest rates, and can be secured or unsecured.

If you need quick access to a small amount of money you may be considering a short-term loan (or payday loan). It is worth remembering, though, that these kinds of loans typically come with high fees and short repayment periods, and can end up being significantly more expensive than other types of loans.

What should you consider when comparing rental bond loans?

When comparing rental bond loans, it is worthwhile to consider factors such as the interest rate of the loan, possible fees and charges, whether the loan is secured or unsecured, and the repayment term of the loan. It is also worth thinking about any potential penalties that you might incur with the loan, as well as the impact on your credit score, and your own ability to repay.

Interest rates

Interest rates for loans will typically either be fixed (meaning they stay the same throughout the term of the loan) or variable (meaning they change depending on a number of factors including the cash rate). It is worth remembering that with a variable rate, your lender could change your interest rate, potentially making it higher. Depending on your credit score, some lenders may offer you a personal loan with an interest rate that’s higher or lower as part of a range.

Depending on your personal situation and finances,  keep in mind if you are a tenant that loans for low-income borrowers typically come with higher fees than other types of loans, which means they can potentially be expensive to pay back.

Fees and charges

Some loans come with one-off application fees, but others can come with ongoing annual or even monthly fees, as well as early repayment fees. It is important to know what you’ll be charged and how often before signing up for a loan. If you are a low-income borrower, you may be charged  higher fees, depending on the loan you are approved for. Short-term and payday loans do not charge interest; however, the fees and charges are often very high, and there may be preferable options to consider.

Secured vs unsecured loans

Loans can either be secured or unsecured. A secured loan often comes at a lower interest rate and requires you to provide an asset, such as a vehicle, as security, while an unsecured loan does not require an asset, but is subject to your ability to repay. If you are unable to meet your repayments on a secured loan, a lender will likely take the asset on which the loan is secured and sell it to recover their money. Likewise, if you are unable to pay back an unsecured personal loan, a lender may take you to court to recover their money.

Repayment terms

Lenders have different requirements in terms of loan repayments, and these can be on a monthly, fortnightly or even weekly basis. It is important to understand when and how often you will be required to make repayments. Depending on your financial situation, weekly or fortnightly payments may not be practical for you.

Penalties

If you take out a variable-rate loan, you may be able to make additional repayments, but it may not be possible to do this on a fixed-rate loan, and you may be charged a penalty for paying the balance of your loan off early.

Credit score

Each time you apply for a loan, this is recorded on your credit history. If you make a number of applications within a short space of time, your credit score could be negatively affected, and this could potentially make it more difficult to be approved for loans in future.

Your own ability to repay a loan

Perhaps most importantly, it is worth asking yourself whether you can realistically pay a loan back. If you feel you are unable to meet the repayment requirements on a loan, you may want to reconsider taking one out, as you could potentially find yourself in a situation where you are in more debt than you were before.

Alternative options

If you are concerned that taking out a rental bond loan may be a risky option, then you may want to consider one of the alternatives available. There are other ways that you can borrow money to cover an important cost of living expense that may not require you to go into debt.

What are some other ways you can get rental bond assistance?

There are a number of schemes in place around Australia to assist people with rental bond payments. Typically these schemes are state-government funded, and offer interest- and fee-free loans to eligible applicants. It is important to check the requirements in your state or territory before applying. At the time of writing, these included:

• Australian Capital Territory: Individuals with less than $10,000 in assets or couples with less than $15,000, who meet the relevant income threshold, can apply for rental bond help from the ACT Government.
• New South Wales: Individuals who are eligible for social housing and have less than $3,000 in assets can apply for a Rentstart Bond Loan from the NSW Government, if they meet other relevant criteria.
• Northern Territory: Bond assistance is available from the NT government, with income and asset limits applying depending on the size of the household.
• Queensland: The Queensland Government offers bond loans and rental grants to people who do not own residential property and are below a certain asset threshold.
• South Australia: The government of South Australia has a rental assistance program with various eligibility criteria, for properties up to a a maximum weekly rental amount of $450.
• Victoria: The Victorian Government offers RentAssist bond loans, with one condition being that your share of the rent is less than 55% of your gross weekly income.
• Western Australia: The WA Housing Authority’s Bond Assistance Loan Scheme can provide a bond and two weeks of advance rent as an interest-free loan to eligible applicants.

Tasmania does not have a state government-funded rental bond assistance scheme, but Housing Connect can help with a variety of housing support services.

It is also worth keeping in mind that if you are a Centrelink recipient, you may be eligible to receive advance payments, depending on the amount you currently receive.

The No Interest Loan Scheme exists to provide low-income individuals and families with access to affordable credit. While these loans cannot be used for rental bond, if you have lived at your current address for at least three months, then you may be able to apply for one for support with the purchase of a household item such as a fridge or washing machine.

What can you do if you’re experiencing financial difficulty?

If you are experiencing financial difficulty or feeling stressed or overwhelmed by your financial situation, you can contact a financial counsellor for help. Financial counselling is typically government-funded, free, non-judgmental and confidential.

A financial counsellor can help you negotiate with creditors including banks and lenders, utility providers, landlords and the Australian Tax Office (ATO). They can also help you create and plan budgets, and understand what forms of financial support may be available to you.

You can call the National Debt Helpline on 1800 007 007 to speak to a financial counsellor for free.

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