Loans From a Bank

You might be considering a bank loan if you are thinking about buying a car or if you need a larger sum of money for something like a holiday. These loans are usually between $5,000 to over $10,000, depending on the amount you can afford and need to be paid off in 1-5 years.

A personal loan could sound good because it is a higher amount, may offer a lower interest rate than other types of credit and the repayments are spread over a long time. But keep in mind that the longer the loan term, the more you will pay in interest. Before you sign a contract and commit to a loan its good read these tips on borrowing money.

How do these loans work?

You first apply for the loan and the bank will assess you eligibility. Most banks have an initial eligibility criteria that you have to meet. This normally includes:

  • Being 18 years old
  • Having a regular income
  • Having a good credit rating
  • Being an Australian citizen or permanent resident
  • Having an Australian address

It’s a good idea to look at different banks as they offer different fees and interest rates depending on the bank. While it might be easier just to go with the bank you already have an account with, looking at about 2-3 other bank loans of the same size will give you a good idea of whether the option you are looking at is a good loan.

How do you apply?

Firstly, you will need to apply for the loan to find out if you are eligible. Filling out an application does not mean you will get the loan, if you don’t have the money to repay the loan or don’t meet the initial criteria your application will get rejected by the bank.

Applying can be a lengthy process as the bank will want to know as much information as they can about your finances. They will probably ask for pay slips, bank statements and credit card statement as well as some ID (like your driver’s license).

The bank will do a credit check on you to find out if you have any outstanding debts, if you want to see your credit report before you apply click here to find out more about getting your free 12 monthly credit check.

Many banks now have online applications for personal or car loans, if you look up the website of the bank you are with they will have information on the loans they offer.

Positives and Negatives


  • Bank loans often have lower interest rates then other loans and offer you a longer period to pay the loan back.
  •  They are quite thorough in checking whether you can repay the loan which makes it a bit easier for you; if the bank rejects you application maybe it’s time to think about other options


  • Different banks have different income requirements for loans some have a $25,000 a year minimum income to apply. To make sure you can afford a loan, try Money Smart’s personal loan calculator.
  • Because the time period to pay back the loan is longer, that means you have to be able to afford the repayments for a longer time as well. Keep this in mind especially if you don’t have a contract for your job as changes in your income could make a huge impact on paying your loan.