If you need to borrow $5000, there may be several different options available to you, depending on your financial situation. If you’re covering a short-term expense, and expect to be able to repay the loan in a matter of weeks or over a couple of months, a short term small loan may be an option. If you expect it’d take you longer to repay a $5000 loan, some lenders may offer personal loans for $5000 that can be repaid over a year or longer.

Different lenders may offer different kinds of loans for a loan amount of $5000, and the kind that's right for you will ultimately depend on your personal requirements. Here are three options that may be worth considering:

Personal loans

Personal loans typically involve paying back the $5000 you borrow in weekly, fortnightly or monthly repayments over a relatively long period of time, such as 12 months or more. Between these longer loan terms and the fact that personal loans tend to have lower interest rates than other credit options (e.g. credit cards, payday loans), personal loan repayments are often relatively affordable, making a smaller impact on your monthly household budget.

Before applying for a personal loan, it's worth calculating whether paying back the $5000 over the longer term may ultimately cost you more in interest charges and fees than some of the other options. The longer a loan’s term, the more repayments you’ll need to make, and the more times you’ll be charged interest on what you owe. Take note of the loan's comparison rate to get an idea of the interest rate plus standard costs associated with the loan.

When you’re comparing lenders, it may be worth including some online-only lenders in your search. Because these businesses tend to be more specialised and have fewer overheads than their competitors, they may charge lower interest rates and fees than some other options. What’s more, your online application can be conveniently completed from home.

Secured personal loans

If you’re looking to borrow $5000 and already own an asset worth a similar amount (e.g. a car or equity in your home) you may be able to use this asset as collateral on a secured personal loan to guarantee what you borrow. While this means you risk losing your security asset if you default on the loan repayments, you may be able to enjoy a lower interest rate, as secured loans reduce the risk to the lender.

A significant percentage of car loans are secured loans, and are guaranteed by the value of the car being purchased. But, secured personal loans are offered for a variety of loan purposes outside of buying a car, as long as the borrower has a suitable asset to offer up as collateral.

If you don’t already own a suitable asset for a secured personal loan, you may need to compare unsecured personal loans and similar unsecured credit options.

Payday loans

A payday loan is a short-term loan that is usually paid to the applicant within 24 hours. Payday loans tend to come with higher fees than other loans and credit products, due to the increased lender risk.

These loans are typically reserved for emergency situations such as medical treatment, home repairs, and car repairs, when a borrower doesn't have time to go through the standard personal loan application process.

The term ‘payday loan’ implies that the borrower intends to repay the loan through future income, and generally over a shorter repayment term than a standard personal loan.

Some payday lenders cap their borrowing limit at $2000, but others have limits of $5000 and sometimes more.

One alternative option to borrowing $5000 is to use a credit card. Though, like most financial products, there are pros and cons worth weighing up.

Many credit cards offer an interest-free period on purchases, often for between 45 and 55 days from the start of each payment cycle (often per month), provided you clear your credit card balance in this time. If you need $5000 for an urgent one-off purchase, and you’re confident you can afford to repay this debt in under a month or so, then you may be able to avoid being charged interest on this debt.

However, if you’re already managing an outstanding credit card debt, you likely won’t be able to benefit from your card’s interest-free days on new purchases until you’ve paid back your current debt.

Also, interest-free days may not apply to credit card cash advances, which could be a problem if you need to borrow $5000 in cash.

If you're in need of a $5000 loan but your credit score has room for improvement, you may see your options limited. Some lenders specialise in providing personal loans for people with bad credit, though these personal loans are more likely to have higher interest rates.

Instead of going ahead with applying for a loan with poor credit history, it may be worth working to improve your credit score first. Start by checking your credit scores and credit history for any discrepancies. You can check your Experian and Equifax credit scores for free by visiting RateCity's credit score hub.

It's also important to check the loan's eligibility criteria and consider contacting the lender and/or a financial adviser first to discuss your options. Make sure you’re confident that your loan application will be approved, as credit checks from lenders and knocked-back loan applications could further damage a bad credit score.

Most banks and similar lenders require proof of income, such as bank statements, before they’ll approve a $5000 personal loan. Even non-bank lenders and payday loan providers may not be willing to lend money to Australians who are exclusively on Centrelink payments. The reason for this is that responsible lenders in Australia are legally obliged not to lend money to people who wouldn’t be able to reasonably afford the repayments.

A small number of lenders may be willing to lend money to unemployed borrowers and/or to borrowers on Centrelink benefits, depending on how much of their total income comes from these benefits.

If you’re struggling with bad credit, or find yourself in a difficult financial position, there may be options available that could help. Contact a financial counsellor or the National Debt Helpline for more information about how to recover from a bad credit or bad debt situation.