A guide to short term cash loans. Find out the fees and charges involved, how to compare and how to apply
Prospective cash loans applicants should be aware that cash loans are intended for financial emergencies and unexpected costs and are not long-term financial solutions. Most online cash loans providers allow their customers to apply online and successful applicants can get their funds to them within hours or the next day if they're approved.
Are you struggling financially?
If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support. Find out more here: https://www.finder.com.au/coronavirus-financial-help
⚠️ 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.
This guide includes information about:
- How cash loans work
- How much they cost
- How to apply
- What to watch out for
Sunshine Short Term Loans
- Loan Amount: $2,000
- Loan Term: 9-14 weeks
- Turnaround Time: 30 minutes - conditions apply
- Fees: 20% of loan amount + 4% of loan amount each month
- Bad credit borrowers OK
- Quick & easy Approval
Cash loan lenders
How does a cash loan work?
These loans are generally designed to meet small, short-term requirements, so they are loans of up to $2,000 and they mostly come with repayment terms of less than one year. If someone's application is accepted, the loan amount is normally transferred to their nominated bank account. Repayment schedules are usually set according to the successful applicant's pay dates and capacity.
A cash loan works in a similar way to a payday loan or a cash advance. Customers apply for the loan amount they need and submit the required documentation and supporting evidence outlined by the lender. This evidence usually includes the last three months of a person's bank statements. The lender will then assess the application based on the information the applicant supplies (usually electronically) and provide the applicant with a decision as to whether or not their application has been accepted.
Online cash loan lenders can often complete the whole process with very short turnaround time. There are also lenders who specialise in bad credit cash loans and provide loans to borrowers who might have less than "perfect" credit history. Other lenders also offer loans to those who receive Centrelink payments.
How to apply
There are a few things that prospective applicants should take into consideration before and during the application process. They should:
- Compare a wide range of small cash loans online.
Prospective applicants should remember to compare the fees and charges, the loan term length, interest rate, repayment schedule, turnaround time and any late fees they may incur. They should also check to make sure that they meet the minimum requirements outlined by the lender.
- Gather their documentation.
They'll need to prove their identity, income, address and ownership of their assets, among other things (depending on the lender), when applying online. Applicants should make sure that they have all the required information before applying.
- Apply online/in-store.
After comparing options and preparing their documentation, customers can apply online, or in the case of some lenders, in-store at the lender's branch. Remember that applicants need to be 100% truthful on their loan application, as it will form a legally binding small amount credit contract.
What to know before comparing loans
Different lenders specialise in specific types of cash loans. Some of them provide a quick turnaround time, others provide extended repayment terms, and some may offer flexible lending requirements. The parameters on which these lenders can be compared are:
- Loan purpose. Successful applicants can generally use funds from payday loans for whatever purpose they need. However, this may not be the case with every lender, and should be checked in the terms prior to submitting an application. Some lenders have restrictions on whether or not their loans can be used to pay bills or rent, for example. Applicants should keep in mind that they will need to list the purpose of the loan on the loan documentation.
- Finding out the complete list of costs.
There is an overall cap on fees and charges on small, short term loans by the Australian government. Applicants who borrow less than $2,000 cannot be charged more than 24% in fees (20% establishment fee and 4% monthly fee). However, if someone borrows more than this (up to $5,000) the lender can charge up to 48% p.a. in interest, and a $400 establishment fee.
- Meeting the eligibility criteria.
Some lenders specialise in bad credit cash loans while others require a reasonable credit score in order to be approved. Bad credit lenders may also differ in their flexibility. For instance, some may lend to those currently bankrupt whereas others will not. It's important for applicants to ensure that they meet the criteria before applying. Each application for credit is listed on a person's credit file, and too many in short period of time could be detrimental to any future loan applications.
- What is the turnaround time?
With the growth of technology, these loan applications are available completely online. There is no need to be physically present to make an application or provide documents (though it is an option with some lenders), and customers can upload all their documents online. Some online lenders will transfer the loan funds within a few hours while others might take a couple of business days to complete the processing.
The pros and cons of cash loan features
- Turnaround time. The processing time for more conventional loans can be quite long with a higher requirement for documentation. On the other hand cash loans are known for their quick disbursal and require less documentation.
- The government has put a cap on fees. There is strong government regulation in this sector. There are caps on fees and charges, which help protect customers from disreputable lenders and gives them a definite repayment schedule within which they can repay the loan.
- You will get stung with higher costs. Even with the ASIC cap, the fees on cash loans are still high, and costs can mount quickly. These loans are more expensive than those available through traditional lenders due to their short-term nature and high fees. There is also no cap on late payment or default fees.
- The loans have a shorter duration. Cash loans are used for short term financial requirements, and have smaller amounts as well as a shorter repayment duration. This might not fulfil the higher financial requirements in some cases as it makes them unsuitable for various purposes. Shorter repayment periods also mean higher repayments, and these may be unaffordable for some individuals.
Things to avoid with cash loans
- Borrowing unnecessarily. Due to faster processing and lower checks these loans might give a feeling of "easy money". This can lead to spending on superfluous items like gadgets or vacations with one of these loans. These loans should really be seen as short term solutions to financial emergencies only. Customers should really consider whether they can afford the repayments before they apply, and only take on the loan if they really need it.
- Taking on too large of a loan. Just like customers should consider whether or not to apply for a loan, they should also determine whether they really need the full amount for which they're applying. A higher loan amount will mean higher ongoing repayments, and may make it more difficult for customers to manage and to repay.
- Failing to contact the lender if you're having trouble meeting repayments. If the borrower is going to make a repayment late or there will be insufficient funds in their account for the lender to direct debit, they need to contact the lender before the repayment is due. Not doing so will see them stuck with late payment fees, direct debit dishonour fees and default fees. This can add a significant amount to what that person owes.
What size cash loan can I get?
When taking on credit it is advisable for borrowers to only take on what they can afford. Below are some of the general borrowing amounts.
The questions we've been asked about cash loans
Can I apply for a loan if I'm not earning an income?
There are some lenders that offer unemployed cash loans if a borrower has the capacity to repay the loan. Some of them have a minimum income requirement, whereas others can provide loans on the back of an asset or using a guarantor. There are also lenders who accept Centrelink payments as income.
Can I get the loan if my credit card is maxed out and I need a short term loan for an emergency?
Yes, these loans act as a buffer during these kinds of circumstances. Just keep in mind that the lender will take into account any credit that a person currently holds when they're determining whether they can currently afford a loan. Applicants should also consider when their next credit card repayment is and if they will be able to manage it with an additional loan.
Are cash loans more expensive than other alternatives?
Cash loans are heavily regulated by the government and there are specific caps on fees charges. However, these loans are still more expensive than traditional lending options due to the short-term nature of the repayments and the allowable fees that are higher than normal. Applicants should keep these high costs in mind before they apply.
Can a business use a cash loan?
If someone is in need of quick business capital or waiting on outstanding invoices to be paid, they could consider a cash loan for their business, though they may find that invoice financing is a more cost effective option.
Is guaranteed approval really available on a cash loan?
Guaranteed approval on any loan in Australia is a thing of the past. Since the Global Financial Crisis, lenders have tightened their restrictions on guaranteed cash loans. If a lender offers someone a cash loan with guaranteed approval they should be wary and understand that no loan is guaranteed.
I haven't been paid yet, can I get a cash advance?
Sometimes someone may need a small amount of cash to get by until payday. This is where a payday cash advance could come in handy.
Need the cash today?
If someone needs the money from their cash loan today, then it could be worth your while to compare a range of fast lenders who offer same-day funding. However, there may be alternative, less expensive options available.
Are online cash loans safe?
The Australian Securities and Investments Commission (ASIC) regulates the cash lending and payday industry very closely. Each lender must comply with a wide range of rules and regulations that are designed to protect borrowers. Despite all of these precautionary measures in place, it's still important to research and check the lender's authenticity, as cash loan lending does attract disreputable lenders.
If I can't repay my cash loan, what options do I have?
If someone cannot meet their loan repayment by the due date, it's important for them to get in contact with their lender as soon as possible. The lender should attempt to work with the borrower to sort the issue out.
Remember that these forms of finance are generally used for emergency situations, so always compare your options before applying online.
Ask an Expert