Short Term Loans vs Credit Card — Which is Better?

If you need quick cash, there’s a couple of things you can do — get a short term loan or use a credit card. With a short term loan, just complete the application process and the funds will be transferred to your account on the same day, sometimes within the hour. With a credit card, go to an ATM and withdraw the money. So, which do you prefer?

Short term loan and credit card — how do they work?

Both short term loans and credit card are types of credit which can be used for whatever reason. There are no restrictions on how you use the funds, which makes it suitable for emergencies, home repairs, or even groceries.

Short term loans, or same day loans, involve applying with a lender for a particular loan amount. If you’re approved, you will get the funds within 24 hours in general. Scheduled repayments and terms (usually ranging from 16 days to a year) are outlined in your contract.

Credit cards can be used to withdraw cash or transfer money from the card to an account. You are charged a higher rate, usually above 20% p.a. It’ll be part of your outstanding balance with a minimum monthly payment to keep the credit account in good standing.

How much do they cost?

Both short term loans and credit card can be costly. A short term loan of less than $2,000 will cost you an establishment fee (20% of the amount you borrow) and a monthly fee (4% ). Getting an advance from your credit card will cost you between 20% and 24% p.a. The cash advance rate is an annual rate, whereas the short term loan is not.

It can be cheaper if you pay the cash advance back quickly. If you can only make the minimum repayment on your credit card, you might want to consider a short term loan instead. With a short term loan, your ongoing repayments will pay the money back entirely in the set term, whereas the cash advance could be an ongoing debt.

[Tweet “Short Term Loans vs Credit Card — Which is Better?”]

Weighing up your options

Pros and cons of applying for a short term loan:

  • Availability — Most short term loans have minimal requirements to be approved. This includes age, income, and residency.
  • Turnaround — Usually, you’ll receive an answer within minutes, and the funds within a day or two.
  • Short-terms — As these loans are paid back quickly, you’ll have no extra debt to worry about.
  • Fees — Rates are still higher than a typical personal loan, although they are mandated by the government. Aside from this, the fees can mount up on late repayments.

Pros and cons of cash advance with your credit card:

  • Accessibility — You only need to find an ATM and withdraw the cash you need.
  • Billing — As the cash advance is part of your credit card billing, it’s concise and you won’t have to worry about a new account.
  • Flexible repayments — You can pay off a credit card at your convenience, as long as you don’t mind the accrued interest.
  • Interest rates — The interest rate charged for a credit card is considerably higher than your standard personal loan. You’ll also accrue interest from the moment you make the cash advance.
  • Overall cost — The overall cost of using a credit card makes it an option you should think twice.

So, which one to apply for?

Now that you understand both products more clearly, you might still wonder which one is right for you. Ask yourself the following to help you decide:

Q: Do you have bad credit?

If yes, you may not be eligible for approval for another loan. Before submitting your application, review the eligibility criteria of the products you are interested in and what you can do about it.

With Cigno Loans, you can apply for short term loans even if you have bad credit. Cigno knows how hard it can be to deal with bad credit loans with a bank or another financial institution. Cigno believes everyone deserves a second chance and your entire credit record should not be ruined by a minor default.

Cigno - Payday Loans, Bad Credit Loans, Loans – No Credit, Unsecured Loans, Centrelink Loans, Loans for Unemployment, Payday Advance, Quick Loans, Fast Cash Loans, Short Term Loans, Easy Loans, Emergency Loans

Q: Do you already have a credit card?

If you do, check how much credit you have left in your account and if it will suffice for your needs. Check the rate you’ll be charged for when you take out a cash advance. Compare this information with your short term loan options to see which one will be more inexpensive (based on when you can do the repayments).

Q: When will you be able to do the repayments?

Short term loans are designed to be paid quickly. Before you apply, make sure you can afford what the lender has set out for you. Contact them to make enquiries on your repayment schedule to fully understand what you are agreeing on and to avoid default.

Credit card cash advance can easily get out of hand if you don’t repay it quickly. The interest can just keep rolling over as there is no fixed repayment term, costing you lots of money in the process.

It’s always important to compare your options before applying for a short term loan or taking cash out on your credit card. Many financial experts advise to also explore other avenues before making a decision.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.


Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice –

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat