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Treasury releases final recommendations on SACCs
Find out how the Government is looking to better regulate Small Amount Credit Contracts (SACCs) and what it means for you.
Government calls on banks to participate in credit reporting
The Treasury has called on banks to participate in comprehensive credit reporting, this time for payday lenders.
Can you actually take out a second payday loan?
Before you go and apply for that next payday loan, find out whether you can actually apply or be knocked back.
Why ASIC'S crackdown will be good for the payday loan industry
How continued reform and improved standards will make payday loans a more justifiable form of credit.
Small amount credit contract laws [INFOGRAPHIC]
What lies ahead for small amount credit contracts for the Australian landscape.
How are banks and payday lenders connected?
If you've ever had a short term loan, you may have borrowed from the Big Four.
Why are they called payday loans?
A payday loan is a form of credit that is advanced to you when you fall short of funds. It is generally paid back in line with when you are paid, hence the term "payday loan". They also can go by the terms short term loans, cash advance loans or bad credit loans. Loans up to $2,000 come with fixed fees, regulated by the government at 24%. This is comprised of a 20% loan establishment fee and a monthly loan fee of 4% – these are calculated based on your principal.
What is my loan principal?
How much you borrow from the lender will always be referred to as the "principal amount" – it is your duty to ensure that you have the available funds to pay back your loan on the due date including any fees and charges applicable
A payday loan is on unsecured terms – meaning that if you can't pay it back, the lender can start legal proceedings against you.
Payday lenders have minimal requirements before applying for a loan. They generally require you to have a regular income, identification and an Australian bank account. If you can prove that you have a steady income and can service the repayments, many payday companies might accept your loan.
Remember it's important to compare your options and other financial avenues before applying.
Payday loans differ from institutions and other lenders in their application processing and criteria. Generally you will be able to apply for a payday loan online and get a response quite quickly. To be approved for a payday loan you have to be meet certain criteria set out by the lender which can include:
- Be 18 years of age or older
- Earn a minimum income, usually around $350 a week
- Have a job with steady income (or benefits)
- Get paid frequently into your bank account (not in cash) either daily, weekly or monthly
- Receive less than half of your income from benefits
- Not be self-employed (some lenders may make an exception)
- If you have bad credit, you need to prove that your current financial situation is stable and reliable
It's important to note that meeting the eligibility requirements does not guarantee your approval of you loan.
The majority of payday loans are researched and applied for online, and no documentation is required to be submitted. However, you will need details to prove your identity and financial situation. Below is a quick guide to what you might need.
- Drivers licence (or proof of ID card)
- Medicare Number
- Three recent payslips
- Your Internet banking details
- Utility bill - e.g. council rates, electricity bill, gas bill, Foxtel/Austar bill, mobile phone bills, broadband internet
Here's what you should consider before applying for a payday loan
Payday loans can be viable options for people looking for financial assistance, but these loans also have some drawbacks which need to be taken into account.
- An option for quick finance. Payday loans give you another quick credit option other than that offered by redraws and credit cards. They are also an option for people whose credit history is less-than-perfect.
- Wide choice. Payday loans have become widely available in recent years, so you have a variety of lenders and loans to choose from.
- Transparent fees. Lenders must not charge more than the ASIC cap on fees. They also usually show you an outline of your repayments with a loan calculator before you apply.
- Shorter loan term. The loans are generally repaid within 60 days which may not be affordable on your budget.
- High costs. As these loans are for a shorter term they come with much higher fees, so this needs to be taken into account when applying.
What if I'm on a pension?
If you have retired or are physically unfit to work, there should be no reason why you can't access a line of credit or a small personal loan. Lenders consider can consider your pension as income, so you may still be eligible depending on your financial situation and what you need the loan for. You can read the guide for pensioners who need a loan
. It's full of tips and advice on how you could maximise your chances of success when applying.
Can I still get a loan if I receive Centrelink?
Some lenders and institutions do consider Centrelink payments as income, so you may be eligible for a loan. It generally depends on how much you earn, what kind of financial situation you're in and what kind of payments you receive. To find out if you are eligible, read our comprehensive guide to getting a loan on Centrelink payments.
Who uses payday loans?
There isn't really a "typical" payday loan borrower
. Payday lenders accept applications from those with bad credit, so you will see those with less-than-perfect credit history applying for these loans. Centrelink applicants and those receiving a pension are also accepted by some lenders, and some also accept borrowers who are unemployed or even bankrupt as long as they can afford the repayments. In saying that, you also see those earning high incomes applying for payday loans
. The short-term nature and quick turnaround time of these loans make them a convenient option. Payday loans are a high-cost option, but for all the borrowers who take them out, they are the option that is right for them.
What to do if you're worried about your credit history
Payday lenders offer flexible eligibility criteria and generally accept those with less-than-perfect credit, but did you know there are lenders who don't check your credit file?
- You can consider a payday loan with no credit check.
Having bad credit shouldn't stop you from getting a loan. Find our which companies will lend you up to $1,000.
- Find a personal loan lender that doesn't check your credit.
Why should what you earn now be affected by what you did in the past? Find a lender who will assess you on your financial situation as it stands today.
What are the benefits of a payday loan over other forms of credit?
- They offer convenience. Lenders that offer payday loans often have online application processes available which makes applying quick and easy.
- The fees are set out before you apply. Payday lenders often set out your repayments early on in the application stages so you know how much the loan will cost.
- There is a low minimum amount. Loans are usually available from $100 up to $2,000. This means you can borrow the exact amount you need to cover your bill and save yourself from incurring unnecessary fees. Most banks set their minimum amount at $5,000. There are some institutions that may offer lower amounts, for example IMB and their IMB Unsecured Personal Loan at $2,000
- You'll get fast access to cash. Depending on the loan provider, funds from a payday loan are made available in your account by the same or next business day. If you are in an emergency and urgently need fast access to cash, a payday loan can provide a temporary financial solution that will cover your cash shortfall.
- Payday loans have lower income and qualifying requirements. Most payday loan lenders accept applications regardless of a person's credit history. If you have a poor credit rating, you may still qualify for a payday loan provided you are able to repay it.
How to improve your payday loan application
It's important to arm yourself with enough knowledge to make an informed decision. When you are comparing payday loans and the repayments, some of the things that might be weighing on your mind are:
- What is the purpose of your loan?
How quickly do you need access to your funds, and how much do you need to borrow? If you need immediate access you may want to consider a payday provider who guarantees funds within the hour. Some providers only offer payday loans up to $1,000 or less for first-time borrowers so if you need more than that then you should consider another lender.
- The fees, charges and interest associated with a loan
The fees and costs will determine whether or not you can afford the repayments, so is important to take into account. Payday loans usually offer set fees and interest rates which make their value easier to compare. You should also check the fees you will be charged if you miss or are late with a repayment before deciding on a loan.
- What lender are you applying with?
When choosing a instant payday loan you should also think about the lender. Check the lender's website and make sure they are a reputable company. You should see how transparent they are with their information on fees and interest rates, as well as how easy it is to contact them.
Our guide on how lenders assess your payday loan application
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It’s not “one size fits all” when it comes to loans. If you’re self-employed, have bad credit or need money quicker than most lenders can review your application, there are options available for you.
What fees are associated with payday loans?
Along with establishment and monthly fees, if you are late or miss a repayment, you may be charged other fees, which can include:
- Late payment fees - if you are late with a repayment and don't notify your lender beforehand then you will likely be charged.
- Arrears fees - you will be charged a fee if your account goes into arrears.
- Collection fees - any loans which are referred to collections or are defaulted on may incur additional fees.
- Collection letter send out - if you receive a collection letter because you have failed to make a repayment and the lender cannot contact you then you may be charged a fee.
- Statement fee - if you request an account statement from the lender you may be charged a fee.
How much interest will you pay on a payday loan?
Since 2012, payday loans have had tighter restrictions and regulations under government reforms that capped fees and charges – no interest is charged. If you are borrowig under $2,000, fees are capped at 20% of the loan amount as an establishment fee and a 4% monthly account-keeping fee. If you borrow $100 for a month and pay back the loan on the required date, the amount debited will be $124. Keep in mind the less time you have the payday loan the higher the annualised rate will be. When comparing payday loans, it is important to keep the repayment schedule and many other factors in mind. To help you compare, you could read our frequently asked questions guide
If the interest rates are so high, why doesn't my contract have an interest rate listed?
By law, payday companies are not allowed to include any reference interest rates on the contract of credit. They can make references to the effective comparison rates and APR, but it's important to remember that payday loan interest rates are based on a shorter loan term than the standard APR calculation of 365 days.
Our guide to repaying your payday loan on time
What type of payday loan do you want?
Payday loans go by a range of names in Australia – from cash advance, to short term payday loan, to emergency cash. Before you apply, compare a range of loans that might fit your needs.
Payday loans can be a convenient way for you to access credit, but you can also be penalised for not sticking to the repayment requirements. If you default on the loan or the loan goes into collection you will receive a negative mark on your credit file that can stay there for as long as seven years. It’s important to only borrow as much as you will be able to repay, and to budget your repayments accordingly. If you have any doubts about your ability to meet your repayments then you may want to consider other credit options.
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Payday loans are called so because they are all about your payday. Your repayments are structured around when you get paid, they're based off how much income you earn, and you are taking one out because your payday is too far away. Payday loans give you a way of bringing your payday closer – maybe you have a wedding on the weekend and you've forgotten to buy a gift, maybe your car has broken down and you need it to drive to work. Whatever has happened you can apply and bring your payday closer with a short-term loan. Have more questions? We have the answers below.
What can I use my payday loan for?
Payday loans can be used for a wide range fo of purposes, but are generally for unexpected expenses. Common uses for payday loans include forgotten bills, car repairs, to cover medical expenses or any other suddent events. You shouldn't use payday loans to fix long term issues in affording your credit, for day-to-day expenses or for a big ticket item such as a car or house.
Could a payday loan help?
|$350 for a romantic weekend|
|$250 for mechanical car repairs|
|$220 for an overdue phone bill|
|$575 for Christmas presents|
|$6300 for a second hand car|
|$4000 for a family holiday|
|$2000 for a rental bond|
How much can I borrow?
Lenders will have a maximum loan amount and some will have a lower maximum amount for first-time borrowers. The amount you're able to borrow depends on how much you get paid and your financial situation – in short, your ability to repay your loan. You can use the payday loan calculator above to help see what your repayments will be on different loan amounts.
Can I pay out my payday loan early?
Many payday loan companies allow you to pay out your loan early without any extra fees associated. You will still have to pay the full amount associated with your credit contract. Contact your payday loan credit provider if you need to organise an early payment.
Can I get my loan deducted from my pay?
Some lenders offer the ability for your employer to repay your loan directly when the payroll is processed. You can confirm this with your lender before you apply. This process can make sure that your loan gets paid on time and no penalties are applied to your account.
How quickly will I get my cash advance money transferred?
Most payday lenders will provide you with a decision on the spot or within 60 seconds. They may need supporting evidence of your wage and employment via bank statements and pay slips. Depending on who you bank with, the funds will be in your account within 24 – 48 hours. This will also depend on whether this is your first loan and if it is a weekend or public holiday. Many payday loan providers claim to offer same day funding. This can be true if you've taken out a loan with that institution before, or are a holder of a prepaid payday loan Visa card. If you are stuck for cash on a Saturday or Sunday, and you already have a relationship with a lender, it could be worth considering comparing its offerings.
Is Credit Sense safe?
Under government law all small amount credit providers must check 90 days worth of your bank statements. This is to genuinely check that you can service the loan and the repayments. Instead of faxing or emailing these statements to the bank, some lenders use online verification through Credit Sense. Credit Sense uses 128-bit security encryption to safely provide you bank statements. You're bank details are never stored and neither will your logins.Read More: Why lenders need your details
I already have a payday loan. Can I get another?
Short answer — no. Payday loans are regulated by government law and designed to be a "stop-gap" solution to financial problems. It is under this law that states you can't get more than one payday loan at a time.
Can I renew my payday loan?
In line with Australian government regulations, you can not renew or roll over your payday loan. You'll never be charged a renewal fee for any payday loan you take. If you want to take another loan, you'll first have to pay off your current loan and then re-apply (after assessing your current financial situation).
Is it a good idea to repeatedly take out payday loans?
If you make all of your repayments on time then generally a lender will approve another loan. Lenders such as Cash Train have a designated members area designed for repeat borrowers. Loan Ranger Cash limit the amount you can borrow on your first few loans, but this limitation is offset by discounts on your fees for subsequent loans. Keep in mind these loans are not a long term solution, and if you frequently need to borrow money then you may need to consider a longer term borrowing option or a more stable line of credit. It may help to lower your expenditure each month to overcome your cash shortfall.
How do I know my details and account are secure?
Australian payday loan companies use a secure online system, such as Verisign, McAfee or Norton to secure data. Payday loans applications are generally carried out on a secure online application form to help protect your privacy. These system uses a 128-bit secure server and SSL encryption to ensure your personal information cannot be stolen. To verify your income, payday lenders will need a snapshot of your account for the past 90 days. These services involved are 100% safe and secure and they only provider a "read-only" view of your account. There are no personal details transmitted and no access to any other information besides your financial history is needed.
I just changed bank accounts, can I still apply for a payday loan?
As per the government regulations, payday lenders require at least 90 days of bank statements. If you have recently changed bank accounts then your income may be hard to prove. If you have access to your previous bank account, you should attempt to obtain statements for the last three months to prove your income. If not, your previous institution should be able to give you access. The more information you can provide, the better your chances are of getting approved.
Where in Australia can I get a payday loan?
Before the new payday loan regulations came in effect, there were different lending requirements and criteria for each state in Australia. However, with the current government regulations, Australian's can have access to extra cash if, and when they need it if they meet the criteria. Use the map below, and click on the state where you need your loan
Related reading: Learn more about unsecured business loans
If you have done your due diligence and still wish to apply for a Payday Loan, and understand the risks of borrowing, start a comparison of payday loansBack to top