Do you need to borrow?
This is the key question to ask before borrowing money. Think about whether you need to make the purchase up front and in full, or if you need access to additional funds to help manage your cash flow. If you’re thinking of buying something, do you really need to purchase it now?
Tools like a budget planner and setting a savings goal can help you make an informed decision. If it takes only a few months to save up and you don’t need to make the purchase right now, perhaps consider waiting it out for a bit.
How will you be spending?
With a credit card, you’re given a credit limit. You can spend up to that limit, and all CommBank personal credit cards come with up to 55 days interest free on purchases, meaning you won't be charged interest on things you buy with your card provided you pay the full statement closing balance by the due date each month. If you don’t pay the full statement closing balance, you will be charged interest.
An overdraft is linked to your transaction account and allows you to access additional funds when your account balance reaches zero. You’re only charged interest once you use the money, and you’re only charged on the amount you use.
With a personal loan you’re given the amount in a lump sum and charged interest on the whole amount, which you will pay off over a period of time.
If you’re wanting a bit of extra money in your pocket to help you manage your cash flow, a credit card or overdraft may be better than a personal loan because you’ll only have to repay what you’ve spent. Credit cards can be used for a range of purchases, while personal loans are used for items that cost more than $4,000. Overdrafts are a way of making sure money is there if you should need it. For example, to manage unexpected expenses.
The interest rate will determine how much you have to repay each month. Check the rates for each option to see which is most suitable for you. With a personal loan you can lock in an interest rate through a Fixed Rate Loan so you’ll know exactly how much you will be repaying each month and also over the entire term of the loan.
How do you want to make your repayments? A personal loan will require you to pay back a certain amount each month over a set period of time, typically between one and seven years. If you’re looking for a more structured system of repaying, a personal loan may be more suitable for you as it has a clear repayment schedule. A Variable Rate Personal Loan or a credit card give you a bit more flexibility with repayments; you can pay off as much as you like above the minimum repayment, whenever you like, and reduce the amount of interest you’re paying.
Before taking out a personal loan or a credit card, be sure you’ll be able to meet the repayments for the amount of money you’d like to borrow.
Creating a budget can help you work this out as well as help you manage your money on an ongoing basis.
Fees and charges
Outside of interest, there are some fees and charges you’ll have to pay when borrowing. A personal loan will have a fee to take out the loan and, if you have a Fixed Rate Loan, it will also have fees if you pay the loan back before the agreed time period or above the maximum additional repayments allowed.
A credit card typically has an annual fee and a fee associated with withdrawing cash. Make sure you take a close look at all the fees and charges before you borrow.
CommBank personal overdrafts have no establishment fee and you are only charged a monthly fee if you use your overdraft.
The main benefit of all of these products is that you’re able to borrow the money that you need, when you need it.
Some credit cards also come with the ability to earn awards points when spending that you can put towards other purchases or redeem for something you want.
Personal loans, on the other hand, can potentially be funded on the same day that you apply1, which can be a big help if you need the cash quickly.
With a CommBank personal overdraft you’ll pay nothing if you don’t use the approved funds. Interest and fees will only accrue where you do use the overdraft. It can also be a handy way to manage the inflows and outflows of your transaction account, such as direct debits.
Whatever you choose, you can easily manage your credit card, overdraft or personal loan in NetBank or the CommBank app. If you do borrow money it’s important that you stay on top of your balance and repayments, so contact us at any time should you require any help in managing these.
If the unexpected happens and you’re behind in paying what you owe, look for assistance where possible. The Department of Human Services can help you find out what services are available for you.
If you’re a CommBank customer, you can call us on 13 3095 or request financial assistance in NetBank if you are behind, or think you are likely to fall behind, in paying what you owe. Consider our support options – including our Financial Assistance Solutions teams who are here to support you in getting back on your feet in times of financial difficulty.