Payday loan application guide
Find out how to apply for a payday loan to have the best chance of being approved.
Payday loans are becoming increasingly popular in Australia, with more and more lenders on the market specialising in small, short-term loans. These lenders differ in their eligibility requirements and application processes, so here's a quick guide on how to find a lender and how to apply for a payday loan.
The application process:
Step 1: Compare lenders
Finding the right lender is the first important start of the application process. Review loan amount, fees, turnaround time and loan term to ensure you are applying for a loan that meets your needs.
Step 2: Review the eligibility criteria and required documents
Lenders vary on their application criteria and the information they need when you apply. Usually, you'll need to be over the age of 18 and receiving a regular income, but lenders will differ on where that income can come from (Centrelink, employment or a combination of the two) and what level of bad credit they will accept. For example, some lenders accept discharged bankrupts but others don't.
Generally, you will need to provide the following documents to apply for a payday loan:
- Documents to verify your identity such as your driver's licence or passport
- Your Internet banking details, which lenders use to access a read-only copy of the last 90 days' of your banking history
- Your employment details, including whether you are employed, how long you have worked there and the nature of that employment (full-time, part-time, etc.)
- Your income and expenses
- If you receive Centrelink payments, you will need to provide details of this and may need to provide Centrelink receipts
- You will need to indicate whether you have taken out a short-term loan in the last 90 days and whether this loan will be used to pay off another payday loan
How do lenders use my documents to approve me for a loan?
While you will be asked for different information depending on which payday lender you apply with, the information is generally used for similar purposes. Here's how lenders use the following details:
- Your bank statements for the last three months
Lenders will go through the last 90 days' of your banking history to get a general idea of your financial position, this is also a requirement of ASIC. To help lenders get your loan to you sooner, most ask for your Internet banking logins in order to obtain a read-only version of your banking history. This is done through a secure, third-party service such as Credit Sense or Yodlee. Can you afford the loan you are taking out? Are you receiving the income you say you are?
Lenders need to be confident that you will be able to manage the repayments, and that you will have money in your account on the day they plan to direct debit repayments. If your account does not show the income you say you are earning, for example, because you earn your income in cash, then you will not be approved for the loan.
- Information to conduct a credit check
Your personal information helps lenders conduct a credit check. Unless they indicate otherwise (if they are no credit check lenders), all payday lenders will conduct a credit check but generally still accept bad credit borrowers. However, the level of bad credit they accept differs. For instance, some lenders will accept you if you are a current or discharged bankrupt while others will not.
- Your Centrelink payment information
Lenders are restricted as to how much they can lend to you if you receive Centrelink payments, and they may have rules to follow that they have set themselves. According to ASIC rules, if the majority of your income comes from Centrelink (50% or more) the repayments of the loan you're applying for can't exceed 20% of your income. This includes any other loan you are currently repaying.
- Your income, pay dates and expenses
Your income and expenses will be used to determine how much of a loan you can afford, and your pay dates will be used by the lender to set your repayment schedule. This will all be verified using your bank statements.
Step 3: Approval
Lenders can usually let you know if you've been approved or not in a matter of minutes. This is because most lenders have a system approved your application rather than a human being. If more information is required in order to approve you, the lender will get in contact to get this information, but your application may be delayed.
Step 4: The contract
If you're approved, you need to agree to the loan contract before you are sent the funds. Many lenders do this by sending you an SMS or a copy of a digital contract that you can sign online. Review the contract carefully as it will set out your loan terms, repayments amounts and fees for late payments or defaults. If you have any questions about the contract, get in contact with your lender.
Step 5: How long it takes to receive your funds
This differs between lenders and will also usually depend on who you bank with. If the lender uses the same bank as you do you can receive your funds within minutes of being sent. Some lenders are able to do this if you bank with any of the Big Four.
However, with most, you will need to apply and be approved by a certain time (usually around 2pm) for the funds to be received on the same day. If you need your loan today, the earlier you apply the better chance you have.
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How much does a payday loan cost?
This depends on how much you apply for:
- Loans up to $2,000. These are referred to as Small Amount Credit Contracts (SACCs) and have a fee cap. You cannot be charged more than a 20% establishment fee and a 4% monthly fee.
- Loans $2,001 - $5,000. Referred to as Medium Amount Credit Contracts (MACCs), these are also restricted by an ASIC fee cap. You cannot be charged more than a $400 establishment fee plus an interest rate of 48% p.a. which includes all other fees and charges.
- Loans over $5,000. Lenders offering loans of this amount, excluding Authorised Deposit-taking Institutions (ADIs) are restricted to charging a rate of 48% p.a. which needs to include all fees and charges.
What if I need another payday loan?
Most payday lenders will allow you to borrow from them more than once if you prove yourself to be a responsible borrower. Some lenders, such as Nimble, make it easy for people to repeatedly take out loans with them by providing them with "members benefits". These benefits include a member's area that makes it easy to apply and a Nimble debit card through which you can receive instantaneous loans.
Have more questions?
How much can I borrow?
This depends on the amount lenders offer and what you can afford. If you're a first-time borrower you may be restricted to a slightly lower amount than what is available.
What can I use the loan for?
You can use the funds for any worthwhile purpose, which can include car repairs, medical expenses or to help manage bills.
What if I'm not approved?
Any loan you aren't approved for will be listed on your credit file, meaning the next time you apply for a loan a lender will be able to see you have recently applied with another lender. Keep this in mind when submitting any additional applications.
Do I have to give my Internet banking logins?
Many lenders require this as this is built-in to their application process. However, you can find lenders that do not require this, allowing you to submit PDFs of your statements, or have a storefront where you can bring your statements in person.
Payday loans are designed to cover you for expenses that come up before payday. These can include car repairs, large purchases such as furniture or appliances, to pay forgotten bills or for medical emergencies. You should not use these loans to solve longer-term financial problems such as to make repayments on existing debts.
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