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When you need cash fast-maybe for a car repair, medical bill, or home upgrade-you’ve got two main paths: a bank or a lender. But which one actually gives you the better deal? It’s not as simple as picking the first option you see. Banks have been around for centuries. Lenders? Many are newer, digital-first, and aggressive with their rates. So who wins when you’re comparing apples to apples?
What Banks Offer for Personal Loans
Big banks like Commonwealth Bank, Westpac, NAB, and ANZ still dominate the personal loan market in Australia. Why? Because they’re trusted. You already have an account with them. They know your income, spending habits, and credit history. That means they can approve you faster-sometimes in under an hour-if your finances look clean.
Interest rates from banks typically start around 8.5% to 12% p.a. for borrowers with excellent credit. They often bundle loans with other services: free account maintenance, overdraft protection, or even discounted home insurance. Some even let you repay early without penalties, which saves you money over time.
But here’s the catch: banks are strict. They want a stable job, a long credit history, and low debt-to-income ratios. If you’re self-employed, recently changed jobs, or have a past late payment, your application might get rejected-even if you can afford the repayments. Their approval process can take 3-7 business days, and you’ll need to submit payslips, tax returns, and bank statements.
What Non-Bank Lenders Offer
Non-bank lenders-think Up, MoneyMe, Jacaranda Finance, or Even Financial-are built for speed and flexibility. They use algorithms instead of human reviewers. You fill out an online form. Within minutes, you get a decision. Some even send money to your account the same day.
Interest rates? They vary wildly. For top-tier borrowers, you might see rates as low as 6.9% p.a. But if your credit score is below 650, you could be looking at 20% or more. That’s a big jump. Still, many lenders offer fixed rates with no hidden fees, and you can often borrow from $1,000 up to $50,000.
These lenders also cater to people banks turn away. If you’re on a contract, have a past default (but paid it off), or are new to Australia, a non-bank lender might say yes when a bank says no. They don’t always ask for payslips-some just check your bank feed via Open Banking.
Key Differences at a Glance
| Feature | Bank | Non-Bank Lender |
|---|---|---|
| Approval Time | 3-7 business days | Minutes to 24 hours |
| Minimum Credit Score | 650+ (usually) | 550+ (some accept lower) |
| Interest Rates (Best Rates) | 8.5%-12% p.a. | 6.9%-15% p.a. |
| Loan Amount Range | $5,000-$100,000 | $1,000-$50,000 |
| Documentation Required | Payslips, tax returns, ID | Bank statements or Open Banking access |
| Early Repayment Fees | Usually none | Sometimes apply |
| Customer Support | Branches, phone, chat | Chat or email only |
Who Should Go Through a Bank?
If you’ve got a steady income, a clean credit file, and you’re not in a rush, a bank is usually the smarter pick. Why? Because you’re more likely to get a lower rate, and you’re dealing with a regulated institution that has to follow strict lending laws. If something goes wrong-like a billing error or a disputed fee-you can escalate to the Australian Financial Complaints Authority (AFCA). Banks are bound by these rules.
Also, if you plan to borrow again in the future-maybe for a car or home-you’ll benefit from having a long-term relationship with your bank. They may offer you better terms down the line because they already know you’re reliable.
Who Should Go Through a Lender?
Non-bank lenders shine when you need cash fast or don’t meet traditional bank criteria. Say you’re a freelancer who just landed a big project but haven’t received payment yet. Or you’re a new migrant with an Australian bank account but no credit history here. Or you’ve got a credit score that’s been damaged by a medical emergency but you’re now back on track.
These lenders also make it easier to compare offers. Platforms like Finder, Canstar, or RateCity let you see dozens of lender options side by side. You can filter by rate, term, fees, and even whether they offer a fixed or variable rate. You don’t have to visit five branches to find the best deal.
What to Watch Out For
Not all lenders are created equal. Some charge high upfront fees-$500 or more-just to process your loan. Others hide extra costs in the fine print. Always check the comparison rate, not just the headline interest rate. The comparison rate includes fees and charges, so it tells you the real cost.
Also, watch out for lenders that don’t check your ability to repay. That’s illegal in Australia under the National Consumer Credit Protection Act. If a lender approves you without asking about your income or expenses, walk away. They’re not helping you-they’re setting you up to fail.
And while some lenders offer same-day cash, that speed comes at a price. The fastest loans often have the highest rates. Ask yourself: do I really need the money today? Or can I wait 48 hours for a better deal?
How to Decide: A Simple Checklist
- Need cash in under 24 hours? → Go with a non-bank lender.
- Have a credit score above 700 and steady job? → Bank will give you the lowest rate.
- Self-employed or irregular income? → Try a lender that uses Open Banking.
- Want to build a long-term relationship? → Bank is better.
- Have a past default or credit issue? → Some lenders specialize in this.
- Want to pay off early? → Confirm there are no early repayment fees.
What Happens After You Apply?
Once you submit your application, whether to a bank or lender, you’ll get a credit check. That’s a hard inquiry and will slightly lower your score-but only for a few months. Don’t apply to five places in one week. That looks desperate and hurts your chances.
If you’re approved, read the contract carefully. Look for:
- Fixed or variable rate?
- Monthly repayment amount and due date
- Any fees (application, monthly, late)
- Early repayment terms
- What happens if you miss a payment
Most lenders and banks in Australia are required to give you a Key Facts Sheet. It’s designed to be clear. If you don’t understand it, ask them to explain it again. No shame in that.
Final Thought: It’s Not About Bank or Lender-It’s About Fit
There’s no universal winner. A bank isn’t automatically better. A lender isn’t automatically risky. The right choice depends on your situation. If you’re financially stable and patient, go bank. If you’re time-poor, credit-challenged, or need flexibility, a lender might be your best bet.
Either way, shop around. Don’t accept the first offer you see. Use comparison tools. Talk to more than one provider. Even a 1% difference in interest rate on a $15,000 loan over five years saves you over $400. That’s a weekend getaway. Or a new tire for your car. Or cash in the bank instead of debt on your mind.
Is it safer to get a personal loan from a bank than a lender?
Yes, banks are generally safer because they’re regulated by the Australian Prudential Regulation Authority (APRA) and must follow strict lending laws. Non-bank lenders are also regulated under the National Consumer Credit Protection Act, but they’re not subject to the same capital requirements. That means if a lender goes out of business, your loan might be sold to another company-but your rights stay the same. Always choose a lender licensed by ASIC.
Can I get a personal loan with bad credit from a bank?
It’s rare. Most banks require a credit score above 650. If your score is below 600, your chances are slim. Some banks offer secured loans (backed by a car or savings) for people with bad credit, but unsecured loans? Almost always denied. Non-bank lenders are more likely to approve you, but expect higher interest rates.
Do lenders charge more fees than banks?
Not necessarily. Many non-bank lenders have no application or monthly fees. Some even offer fee-free early repayments. Banks sometimes charge application fees, but they’re often waived for existing customers. The real difference is in the interest rate. Always compare the comparison rate, not just the headline rate, to see the true cost.
How long does it take to get a personal loan from a bank?
Typically 3 to 7 business days. This includes document review, credit checks, and internal approvals. If you’re an existing customer with all documents ready, it might be faster-sometimes 48 hours. But don’t expect same-day cash unless you’re using a lender.
Can I switch from a lender to a bank later?
Yes. Many people take a short-term loan from a lender to cover an emergency, then refinance with a bank once their credit improves. Banks often offer lower rates for refinancing, especially if you’ve made all payments on time. Just check for early repayment fees on your current loan first.
Next Steps
If you’re ready to apply, start by checking your credit score for free through Equifax or Experian. Then use a comparison site like Finder or RateCity to see what’s available. Apply to one or two options at most. Don’t apply to five lenders in one week-it’ll tank your credit score.
And if you’re unsure? Talk to a free financial counselor through the National Debt Helpline. They don’t sell loans. They just help you understand your options. No pressure. No fine print. Just clear advice.
