Payday loans can offer customers a way to get quick access to cash for financial emergencies. People use payday loans for last minute expenses such as getting their car repaired or paying off a forgotten bill, as these loans are designed to cover people when they're caught short before payday. However, payday loans are an expensive way to borrow money so before applying for one it’s important to understand how they work, what fees are involved and what interest rates are charged.
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.
How does a payday loan work?
Payday loans work by offering applicants a small amount of money, usually between $100 and $2,000, as a loan. These loans are referred to as "payday" loans because the amount and terms are usually set according to a person's income and pay frequency, and are designed to be paid back in line with when they next get paid.
How much are payday loan interest rates?
Payday lenders are restricted as to how much they can charge in interest and fees. The cost will also depend on how much someone borrows. Here is a breakdown of the maximum fees and rates payday lenders are able to charge:
|Loan amount||Establishment fee||Monthly fee||Interest rate|
|Up to $2,000||20% of loan amount||4% of loan amount||N/A|
|$2,001 - $5,000||$400||N/A||48% p.a.|
|Over $5,000||N/A||N/A||48% p.a.|
The above caps don't apply to authorised deposit-taking institutions such as banks, credit unions or building societies.
What is a payday loan interest rate?
An "interest rate" depends on how much a loan applicant is borrowing and for how long, as well as factors such as their financial circumstances and their credit rating (however most payday lenders for loans under $2,000 will charge the maximum fees possible to all borrowers). To get an indication of the rate and costs, prospective applicants can use the payday loan calculator below.
Use the slider to select how much you want to borrow and for how long, and you will get an indication of how much you could be charged.
This calculator is designed to provide you with an estimate based on the numbers you enter. Your personal details are not taken into account and all calculations are based off the calculation model. This calculator is not intended to be the sole source of your information when making a decision regarding your loan, and this calculator also does not guarantee your eligibility. The calculator works off the following assumptions: fees do not change for the life of the loan, your lender will charge a 20% establishment fee and a monthly fee that is 4% of your principal loan amount. You may want to seek advice from a financial professional before signing up to a loan.
How do these interest rates differ to rates of other financial products?
While these restrictions are in place to attempt to help to keep payday loans manageable, they are still an expensive way to borrow more and should only be used as a last resort. If available, other credit options are likely to be a better option for people who need to borrow money.
- Credit cards. Credit card interest rates vary depending on the type of card someone holds. Some rates can be as low as 9% p.a., while others can be as high as 22% p.a. Credit card rates are variable while payday rates are fixed. A good comparison to make with payday loan interest rates are credit card cash advances rates, which are typically around 22% and also give customers convenient access to cash.
- Personal loans. The interest rates charged on more traditional personal loans vary, but usually carry rates of between 8% p.a. to 15% p.a. (payday loan interest rates are charged monthly, so end up being very expensive when considered in terms of an annual rate). The rate someone is offered depends on whether the loan is secured or unsecured. Customers can compare and read more about personal loans on this page.
What other fees and charges come with payday loans?
Lenders are able to charge the establishment and monthly/annual fees outlined above if someone keeps their loan in good standing. If customers make payments late or default on your loans, lenders may also charge the following:
- Default fees or charges. These are charged by the lender if someone defaults on a payday loan. This amount is set by the lender and may include late fees that are charged until someone pays the loan back. A person's bank may also charge them an additional fee for defaulting on a direct debit.
- Enforcement expenses. These are charged if someone fails to pay back the loan and the lender is forced to take that person to court.
Sunshine Short Term Loans
Go to site
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- 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
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- Bad credit applicants considered
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- Borrow up to $2,000
Compare costs of payday loans
How to compare payday loans
While lenders are restricted in terms of the fees they can charge, it’s still important to compare options based on the other features offered. Here are some things to look out for when comparing payday loan options:
- What is the loan turnaround time?
Most payday lenders offer a quick turnaround time, although some may be quicker than others. Prospective borrowers should be sure to check when the lender will be able to transfer the loan amount to them and whether this will meet their needs.
- Is the lender easy to contact?
As most payday lenders operate online, borrowers want to be sure they are easily contactable via phone, email or live chat. If someone is having problems with repayments or needs to ask questions, they will want to be able to get in contact with them.
- Does the site have clear information?
Borrowers should also check that they are able to find all the information that they need on the lender's website. Applicants should check to see if they can find a page for frequently asked questions, information about their fees, and terms and conditions.
- What are the loan terms and amount?
A borrower should also check that they will be offered the loan amount and terms that they need. Some lenders only offer a small loan to new borrowers, while some may only offer very short loan terms that will make repayments too high to afford.
- Does the loan have any additional features?
Some payday lenders offer other benefits and features that may be of interest to their customers. For example, Nimble offers a prepaid Visa Debit card that allows customers to receive their loans instantly should they need to borrow again.
Things to consider with payday loans
As with any type of loan, prospective applicants need to consider their own personal financial situation before they decide to take one out. They should think about the amount they're looking to borrow, the loan terms that they may be offered, and whether the repayments will be affordable to them. They should also consider whether a payday loan is the best type of finance for them, or whether they might want to look at credit cards, a line of credit or a secured or unsecured personal loan.
How to apply
To apply for a payday loan, customers can compare their options using the comparison table on this page. Once they find a lender, they can click ‘Go to Site’ and be directed through to the lender’s online application form. To apply, loan customers will need to be over the age of 18 and be receiving some sort of income directly into their bank account.