Payday loan application guide

Payday loans are becoming increasingly popular in Australia, with more and more lenders on the market specialising in small, short-term loans. These lenders do differ somewhat 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. Prospective payday loan applicants should review the loan amount, fees, turnaround time and loan term to ensure that they are applying for a loan that meets their needs.

Step 2: Review the eligibility criteria and required documents

Lenders vary on their application criteria and the information they need when from their customers. Usually, applicants will need to be over the age of 18, be a permanent resident of Australia 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, and some lenders may also lend to people on certain visas. For example, some lenders accept discharged bankrupts, but others don't.

Generally, applicants will need to provide the following documents in order to apply for a payday loan. Applicants will need to provide the following:

• Documents to verify their identity such as their driver's licence or passport.
• Their Internet banking details, which lenders use to access a read-only copy of the last 90 days' of their banking history.
• Their employment details, including whether they are employed, how long they have worked at their current place of employment and the nature of that employment (full-time, part-time, etc.)
• Their income and expenses.
• If they receive Centrelink payments they will need to provide details of this and may need to provide Centrelink receipts.
• They will need to indicate whether they 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.

Step 3: Approval

Lenders can usually let an applicant know if they've been approved or not in a matter of minutes. This is because most lenders have an electronic system, often known as a loan engine, to assess their applications, rather than a human being. If more information is required in order to approve someone, the lender will get in contact with the applicant to get this information, and the person's application may be delayed.

Step 4: The contract

If someone is approved, they need to agree to the loan contract before they are sent the funds. Many lenders do this by sending their customers an SMS or a copy of a digital contract that they can sign online. Applicants should review the contract carefully, as it will set out their loan terms, repayments amounts and fees for late payments or defaults. If someone has any questions about the contract, they should get in contact with their lender before signing.

Step 5: How long it takes to receive funds

This differs between lenders and will also usually depend on who the applicant banks with. If the lender uses the same bank as the applicant, they can receive their funds within minutes of being sent. Some lenders are able to do this if a customer banks with any of the Big Four.

However, with most, customers 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 an applicant needs their loan today, the earlier they apply, the better chance they have.

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Name	Product	Maximum loan amount	Term of Loan	Turnaround time	Arrears Fee	Costs	Fortnightly Repayment (for $1500 Loan)
Sunshine Short Term Loans		$2,000	9-14 weeks	30 minutes - conditions apply	$35	20% of loan amount + 4% of loan amount each month	$396	A small loan up to $2,000 that you repay over 9-14 weeks. Loans approved and funded in as little as 30 minutes.	Go to site More Info	Compare	loading Fetching your data...
Nimble Short Term Loan		$2,000	62 days to 3 months	1 hour - conditions apply	$15	20% of loan amount + 4% of loan amount each month	$372	A loan up to $2,000 with terms up to 62 days to 3 months. Centrelink cannot be your primary source of income.	Go to site More Info	Compare	loading Fetching your data...
Safe Financial Small Loan		$5,000	22 - 52 weeks	Same day - conditions apply	$35	Up to $2,000 - 20% establishment fee + 4% monthly. Above $2,000 - $400 + from 8.7% to 48% APR	$396	Borrow from $1,000 to $5,000 with same-day funding and no early repayment fees.	Go to site More Info	Compare	loading Fetching your data...
Fair Go Finance Small Loan		$2,000	3-12 months	1 business day	$35	Establishment fee from 20% of loan amount + monthly fee from 4%	$354	A small loan between $500 and $2,000 that can be funded in 24 hours.	Go to site More Info	Compare	loading Fetching your data...
Speckle Small Loan		$2,000	3 to 12 months	1 business day	$5	10% of loan amount + 2% of loan amount each month	$348	A small loan up to $2,000 from a lender backed by NAB. Transparent eligibility criteria and competitive costs.	Go to site More Info	Compare	loading Fetching your data...

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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.
• Unreputable 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.

How much does a payday loan cost?

This depends on how much someone applies for:

• Loans up to $2,000. These are referred to as Small Amount Credit Contracts (SACCs) and have a fee cap. Applicants 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. Customers 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 their customers to borrow from them more than once if they prove themselves 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. Be aware that payday loans are not long-term financial solutions and repeat borrowing of payday loans may end up being financially damaging.

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