Payday loans might give you access to quick cash but they come with high interest rates and fees. There are other options available, especially for borrowers on low incomes.
Alternatives to payday loans
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
Why payday lenders are a risky choice
Traditional lenders won't lend to people with low incomes and poor credit history. If you are in this position, it seems like you're left with little option other than to take out small loans with payday lenders. These loans are quick and easy to get but the high fees and interest charges make them very expensive.
Fortunately, there are alternatives loans available to help people on low incomes or who can not easily access credit. There are generally no fees and very low-interest rates.
There are also some other services anyone can use, such as buy now pay later and pay on demand apps. These aren't traditional loans, but you can use them in different ways to cover sudden expenses or purchases.
Pay on demand apps
Pay on demand is a type of short-term loan. With it, you can borrow a portion of your paycheck before your actual payday. It's offered by banks, by employers through services such as InstaPay, and also through pay on demand apps such as Beforepay. These services usually don't require a credit check, although banks may require it.
- Loan amount: This depends on your service provider and can range from $100 to $1,250. How much you can borrow also depends on how much you earn.
- Loan term: Less than a month, since repayments will be automatically deducted from your account when you receive your pay.
- Interest: Most services do not charge interest. However, if your lender is a bank, you may have to pay interest if you don't make your payment in full by the due date.
- Fees: From $2 to $10 dollars. Some service providers may also charge up to 5% of the borrowed amount.
- Purpose of the loan: To tide you over until payday. You can use it to pay for unexpected expenses, such as minor car repairs, or for everyday expenses like food or transport.
To apply for a pay on demand service, you may be minimum income requirements. The criteria will depend on the type of service you're applying for.
For employer-offered services:
- You must be employed
- Your employer has to have signed up for the program
For pay on demand apps:
- You must meet the minimum income requirement, which will differ based on the service provider
- You may be ineligible if your only income is from Centrelink, if your pay is irregular or if you gamble regularly
For bank-offered services:
- You must meet the minimum income threshold
- You must have an account with the bank and your salary should be deposited into this account
Compare pay on demand services
Debt consolidation loans
If you're looking to pay off multiple existing debts, debt consolidation loans may be a better option than payday loans.
By combining multiple debts you can pay off the existing debts and replace them with a single loan account with one interest rate. This is easier to manage and you'll probably pay less in interest and fees.
There are also debt consolidation loans specifically aimed at helping you get out of debt.
Before applying, you should look into whether there are any costs associated with exiting your existing loan contracts. You should only apply for this loan if it costs less than your current debts put together.
- Loan amount: These loans are suitable for debt between $2,000 and $50,000.
- Loan term: From 1 to 7 years.
- Interest rate: Varies based on the lender.
- Fees: Varies based on the lender.
- Purpose of the loan: To consolidate all your debt into a single loan. This way, you can save money by paying interest for only one loan and manage only one credit product.
Buy Now Pay Later
Buy now pay later (BNPL) companies in Australia include Afterpay, Zip, humm and Klarna. These companies let you purchase an item now and pay it off in multiple installments.
BNPL companies don't charge interest in most cases. But they often charge you a monthly fee. If you can repay the purchase on time it won't cost you extra. But if you miss repayments then you get charged a fee.
The amount you can borrow and the fees you have to pay vary by provider.
If you just need to cover a specific purchase and you know you can cover the repayments, BNPL could work out for you. But if you miss repayments the fees will quickly add up.
No Interest Loan Scheme
Good Shepherd Microfinance's No Interest Loan Scheme provides small, interest-free loans to help people on a low income. Loans can be used for vocational training, white goods or medical expenses.
- Loan amount: Up to $2,000 for essential appliances or furniture, car repairs or education costs. Up to $3,000 for rental bonds, rent in advance or disaster recovery support.
- Loan term: 24 months.
- Interest rate: No interest charged.
- Fees: No monthly fees.
- Purpose of the loan: You can use the money to pay for medical expenses, vocational education, computers or furniture. You cannot use it for debt consolidation, bond, rent arrears, holidays or bills.
Loans are provided by over 250 community organisations across Australia. To apply, visit a local provider to complete the paperwork. There is no credit check.
To be eligible you must:
- Have a healthcare or pension card.
- Or earn under $70,000 a year (single) or $100,000 a year (couple).
- Or have experienced family violence in the last 10 years.
- Have a willingness and capacity to repay the loan.
Home Equity Scheme
The Home Equity Scheme (formerly the Pension Loan Scheme) allows eligible older Australians to access the equity in their homes via a government loan.
Your loan is secured against the value of your home, plus an interest rate of 3.95%.
- Loan term: Can be indefinite.
- Interest rate: 3.95% p.a.
- Fees: You are responsible for paying any legal fees that are required to establish the loan. This amount can be added to the loan value.
- Purpose of the loan: The loan acts like a pension and so can be used for day-to-day living costs or other expenses.
Loans are provided by Centrelink and can be applied for online or at an office. You must meet with a Financial Services Information Officer to discuss the loan before it will be approved.
To be eligible you must:
- Be of pension age
- Own or part-own property in Australia to use as security
- Are eligible for a qualifying pension
Centrelink Advance Payment
It is possible to receive an advance payment for most Centrelink benefit payments. This is an advance payment, which is paid back out of your later benefit payments.
Centrelink may give you part of your allowance in a lump sum. This is useful if you need access to larger sums at fixed periods during the year, rather than receiving a regular income. It can also benefit students who might need lump sums at particular times.
- Loan amount: This depends on the type of Centrelink payment you are receiving. Loan amounts are capped for each payment type.
- Interest rate: No interest rate is charged on advance payments.
- Fees: There are no fees related to receiving an advance payment.
- Purpose of the loan: You can use the loan for normal living expenses and one-off costs.
You can apply for an advance payment online using the Centrelink app, online with a MyGov account, by phone, or at a service centre.
Army Relief Trust Fund
Army Relief Trust Fund provides low-cost loans, relief loans and hardship grants for serving Army members.
- Loan amount: Between $300 and $6,000.
- Loan term: Must be repaid within 2 years.
- Interest rate: 2% p.a. maintenance fee for general loans, no charge for hardship relief loans.
- Purpose of the loan: The trust provides loans for any worthwhile purpose, although it prioritises people with greater need or who are experiencing hardship.
Loans can be applied for online, and approval is at the discretion of the Trust. The serving member’s commanding officer or supervisor will be involved in the decision-making process. Repayments are taken directly from the member’s pay.
To be eligible you must have served in the Australian Army for a minimum of 12 months.