Short term loans, commonly referred to as payday loans, are usually used for financial emergencies, because of the high fees associated with them. People who already have one payday loan and are considering taking out another (or even currently have two and are considering a third) should consider the following prior to submitting an application.
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.
Is it possible to take out multiple payday loans?
The short answer is yes, but the longer answer is that applicants will need to meet more stringent criteria than when they applied for their first one.This is not because lenders apply different criteria to second loans; this is an ASIC requirement for the lender. This is because payday loans are intended for financial emergencies and not for long-term financial solutions, so requiring more than one at any one time may be a sign that someone is struggling financially. As someone is already repaying a Small Amount Credit Contract (SACC), the lender will need to take further steps to ensure that they will be able to manage the additional repayments.
What are the ASIC requirements for multiple payday loans?
ASIC has many requirements in the payday lending space to protect the borrower. Payday lenders have to take further steps to ensure their borrowers won't be under substantial hardship when making repayments if any of the following situations apply:
- They are currently repaying another payday loan
- They are currently in default under any payday loan
- They've had two or more payday loans in the 90 days prior to applying
- They plan to use this payday loan to repay another payday loan
What will lenders look at when someone applies for a second payday loan?
To comply with ASIC regulations, lenders need to ensure that their customers will be able to repay the loan without substantial hardship. To do this, they will review an applicant's current financial situation and look at multiple factors, including their credit history, what payments they make towards their current payday loan and any other loans, whether they receive Centrelink payments, how they are employed and their income. This may mean that customers are no longer eligible for a loan that they were previously eligible for.
Getting approved for a second payday loan
There's no way to secure approval on a second payday loan, and being approved for a second loan will probably be harder for people that it was for them being approved for the first loan. It's important for prospective applicants to keep the following in mind, they should:
- Consider their alternatives. There is a range of low and no interest loan alternatives that loan customers can consider if they are in need of money quickly. Find out more about payday loan alternatives here.
- Re-examine the eligibility criteria of the lender before applying. Applicants may or may not be eligible for loans they were once eligible for, so it's wise not to assume. Some lenders may specify that their borrowers cannot currently be repaying a payday loan or using the loan to repay a payday loan, so applicants should check this to avoid a rejected application.
- Check their budget before applying. Someone should always check that they can meet the repayments of the loan that they are applying for. If someone thinks that they might struggle to make multiple loan repayments, then they may should consider alternative financing options, such as community financial assistance programs, or reconsider whether they need the loan at all. Payday loans are not a long-term financial solution and are only meant to serve an immediate need for funds.
Compare options before applying and always examine the eligibility criteria carefully. There's a range of payday loans available, so applicants have a better chance than ever before of finding the right loan for their situation.