Most $1,200 loans are a form of payday loan as they are small, short term loans. $1,200 payday loans are usually repayable within 16-60 days. Potential borrowers should be aware that these loans come with high costs attached, including the maximum establishment and monthly fees allowed by the Australian Securities & Investments Commission (ASIC). These type of loans should generally be avoided but can be used in cases of financial emergency. Depending on the eligibility of the borrower, there are some lower cost options available for $1,200 finance.
What are $1,200 loans?
$1,200 loans are loans for the value of $1,200. Predominantly, loans for this value are often short term loans, or payday loans, as standard personal loans are not available for less than the value of $2,001. Lenders that supply loans for under $2,001 are not allowed to charge interest rates, but instead can charge establishment fees (up to 20%) and monthly fees (up to 4% per month).
How do they work?
$1,200 loans work in much the same way as any other type of loan. You apply (online, in branch or over the phone), and are either approved or rejected based on your application details and current financial circumstances. If your application is successful, you will be forwarded $1,200 to your nominated bank account.
Because loans for the value of $1,200 are generally short term loans, the turnaround time is usually faster than standard personal loans. This is because short term loans, or payday loans, require less documentation than standard personal loans. With these sorts of loans, you may be able to qualify for your funding in as little as
$1,200 loan options
If you have a bad credit history
Loan options are more limited when borrowers have bad credit. However, many payday lenders may still consider bad credit borrowers. Bad credit payday lenders will determine whether their customers can repay the loan on a case-by-case basis, based on their proof of income (either through employment or Centrelink payments). While payday lenders may still lend money to people with negative marks on their credit records, prospective borrowers ought to be wary of lenders that claim not to check credit files at all. It is a requirement that all responsible lenders check credit scores as part of the process of determining whether their customers will be able to repay their loans.
If you have a good credit history
There are more options available to borrowers if they have good credit. Borrowers who need money urgently can ask if their bank offers same-day personal loans to existing customers. If this isn't something their bank offers, overdrafts can usually be set up with their transaction account within a day, giving them access to a line of credit. While they have the option of applying for a conventional personal loan, this will usually only be available for an amount upwards of $5,000.
If you are eligible for a low or no interest loan
Low and no interest loans are essentially community financial assistance programs aimed at those receiving Centrelink payments or on lower incomes. Eligible applicants must:
- Have a health care card or pension card
- Have resided in your current premises for more than 3 months
- Show a willingness and capacity to repay
- Not be using the loan to pay rent, bills or for a holiday
The loan is designed to finance essentials. This includes household items like furniture, washing machines and fridges, some medical and dental services and also educational purchases including computers and textbooks.
How you can compare $1,200 loans
- Know the eligibility criteria. Applicants may be eligible with some lenders and ineligible with others, so they need to check the minimum eligibility before they apply. Requirements need to be met for income, age and residency, and there may also be restrictions for those who receive Centrelink payments.
- Check what the fees will be. Lenders are capped as to how much they can charge you for a $1,200 short-term loan, so borrowers are likely to see similar fees across the board because payday lenders normally charge the maximum that they are able to. A breakdown of these fees is outlined in the section below.
- What are the repayments? While the repayment terms, such as how long they have to repay the loan, may vary, their repayments will usually be structured according to the frequency of their pay. Make sure that these repayments fit within the budget.
What are the risks of payday loans?
- Unaffordable repayments. Payday loans are an expensive way to borrow money and should only be used as a last resort. Check the size of each repayment and ensure you will be able to pay it on time. Unaffordable repayments can lead to late fees that will only make things worse.
- High rates and fees. Rates and fees on payday loans are high but there are rules in place so be sure to check your lender is not charging you more than ASIC allows. Also, look at what you would be charged if you are late on a payment or if you default on the loan altogether.
- Disreputable lenders. All Australian lenders should be accredited by ASIC. Check for a credit licence on the ASIC Register and ensure that the lender is easily contactable.
- Impact on credit score. Every loan application shows up on credit reports. While lenders might not consider credit history, applying for lots of loans within a short period can have a negative impact on your credit score in the future.
The costs of borrowing $1,200
Lenders are restricted as to how much they can charge for a $1,200 loan. Restrictions apply when the lender is a non-Authorised Deposit-taking Institution (ADI) which excludes banks, credit unions and building societies. The loan has to be under $2,000 and needs to be repaid within terms of 16 days to 1 year.
If the loan meets these requirements, the lender cannot charge more than 20% of the principal loan amount as an establishment fee and 4% of the principal loan amount as a monthly fee.
For a loan of $1,200 borrowed for a 1-month term, customers will pay $1,488 in total with 2 fortnightly repayments of $744.
Dos and don'ts of $1,200 loans
- Consider your options carefully. $1,200 is a relatively small loan that may come with a high price tag if you opt for a short-term loan. Depending on what you need the funds for, you may have the option of interest-free finance for the same amount. Consider your options before opting for a payday loan.
- Check you're eligible. It's important to thoroughly check a loan's eligibility criteria before applying. This will generally include factors about your financial standing, such as your employment status and income.
- Your due diligence. Always check the reputation of a lender before submitting a loan application. While lending institutions are heavily regulated by the Australian Securities & Investments Commission (ASIC), there may still be some organisations that prey on financially vulnerable people, such as people on low incomes or those with bad credit histories. Make sure that your lender is legitimate and has a good reputation before you apply.
- Forget to compare. It's important to compare various loans before applying to ensure that you are opting for the best deal possible. It's also worth bearing in mind that a payday loan is not the only means of financing a $1,200 purchase/expense. You can also check out interest-free loan options and credit cards, as well as other financial products.
- Over-apply. Don't apply for more than one loan at a time. This is because lenders generally look at multiple applications or loan rejections unfavourably. Once you are happy with a loan and you meet all of the required eligibility criteria, submit an application for that financial product only.
- Exceed your budget. Make sure that you are able to repay your loan comfortably within your current budget before you commit to a finance application. If you don't have a budget written up, you can find advice on how to create one in our handy guide.
What can I use a $1,200 loan for?
There are a multitude of options for what you can use your unsecured personal loan for:
Questions about $1,200 loans answered
Can I apply for a loan if I receive Centrelink payments?
Yes. Many lenders offer Centrelink loans to applicants who show they will be able to manage the repayments. Review the eligibility criteria outlined in the review pages before you apply to see what requirements you will need to meet.
When will I receive my loan?
This differs between lenders. Usually, if you submit your application and accept your loan contract before 2:30pm on a business day, you can receive your loan amount on that same day.
How do I make repayments?
Your lender will outline this in your loan contract. However, your loan amount will normally be direct debited from the bank account your loan was deposited into upon the agreed-upon dates.
I won’t have enough money to cover my repayment. What do I do?
The first step is to get in touch with your lender – this may save you a late fee or a direct debit dishonour fee. Your lender may be able to set up a payment plan or delay your repayment for you. If you are concerned about being able to meet repayments prior to submitting a loan application, it might benefit you to contact the Financial Counsellors hotline on 1800 007 007. Lines are open Monday-Friday 4.30pm-5pm and are free of charge.
When can I apply for another loan?
It is important to note that payday loans aren’t designed to be a long-term financial solution. If you do need to apply for another loan you will need to have repaid your first loan in full before applying. You can apply with your original lender or find a different lender.