Payday Loans FAQ

Our most frequently asked payday loan questions - answered

Updated Feb 1, 2021

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Before someone takes out any type of loan it’s important to understand how it works. The same is true of payday loans, possibly even more so, because many payday lenders may be intentionally vague about how their loans work in order to attract financially vulnerable customers. We’ve put together some of the most common questions we’ve been asked about payday loans so our readers can learn a bit more about them, and find out if they’re the right type of credit for their situation.

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.

⚠️ 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.

What is a payday loan?

A payday loan is a small, short term loan. The loan amount is usually between $100 and $2,000 and the loan terms are usually between 16 days and one year.

Why is it called a payday loan?

It’s called a payday loan because the loan amount is designed to be paid back when the borrower next gets paid. The amount customers are lent is usually small, and customers are only lent what they will receive in their income over the next month or so.

What interest and fees are charged with payday loans?

The Australian government has placed a fee cap for payday loans. As of the 1st July 2013, payday lenders are only able to charge the following fees:

A one-off establishment fee which is 20% of the amount loaned.
A monthly fee which is 4% of the principal loan amount.
Any applicable government fees or charges.
Fees or charges if someone defaults on the loan.
Enforcement expenses if the lender is forced to take someone to court to recover the money that they owe them.

If the fees are capped at 24%, why do people talk about interest rates that are almost 1000%?

It's important to keep in mind that lenders do not charge interest on payday loans, and are only allowed to charge fees that are expressed as a percentage of the amount that someone borrows. While these fees are capped at 24%, it's charged over a shorter space of time compared to other forms of credit. Most other interest, including interest on credit cards, personal loans and home loans, is charged annually, compared to payday loans which is charged monthly.

How does the interest on a payday loan compare to personal loans and other forms of credit?

As mentioned in the question above, most other credit accounts, including personal loans, home loans and credit cards, charge interest at an annual rate, whereas payday loans charge interest (in the form of fees) for much shorter period of time. In that sense, potential payday loan applicants should be considering the interest charged on a payday loan by multiplying it, so they can better compare.

So, if you take out a payday loan of $500 for a period of 30 days, you will be charged 24% in fees. The loan customers will pay $120 in fees, totalling $620 in principal and repayments. If someone is charged 24% for one month’s worth of repayment, they are essentially paying the equivalent of 288% p.a. (12 months x 24%). Prospective borrowers should remember to keep this in mind when they are considering how competitive payday loans are compared to other loans and forms of credit.

What are the loan terms for payday loans?

Payday lenders differ on the terms they offer, but the minimum terms they are able to offer is 16 days. Lenders usually offer terms that line up with the pay structure of their customers, for instance, if someone is paid fortnightly they might allow them to repay the loan in two fortnightly repayments, whereas if they are paid monthly they may have to pay the loan back in full when they next get paid. The lender should outline their proposed terms in a loan contract before anyone agrees to a loan.

How quickly do I receive a payday loan?

Payday loans usually have a quick turnaround time, although the actual time is different for each lender and may also depend on the borrower's bank. Upon approval, some lenders may be able to transfer successful applicants the money within 60 minutes, while some may be able to transfer the money within one business day or more.

Can people with bad credit get a payday loan?

As these loans are small and the repayments are structured around the borrower's next payday, the eligibility criteria tends to be a bit more flexible. Although, keep in mind that lenders will still differ in their lending criteria. Most payday lenders will be more concerned with someone's ability to pay back the loan rather than the applicant's credit history, and so will focus more on a person's income and their financial activity over the last three months.

Do payday lenders do credit checks?

Some payday lender will carry out credit checks, but not all will. They will usually outline this on their website.

Are payday lenders "dodgy"?

Unfortunately, there are disreputable lenders who do prey on people with poor credit or those who are experiencing financial hardship. In saying this, there are some very reputable lenders who may be able to offer some clients genuine help. If someone if experiencing genuine financial hardship, getting a payday loan could very easily trap them into a spiral of debt, and may not be a viable solution to their problems.

How can I stop payday lenders calling my employer?

Payday lenders may get in contact with a person's employer for a few different reasons, such as to confirm that person's employment and income amount. Therefore, a way to avoid this is for applicants to provide enough documentation when they apply, so that the payday lender will not need to contact their employer. Keep in mind that this is not an option for every lender. If someone wants to know whether the lender will contact their employer, they can give them a call to confirm this.

Some lenders also offer this information on their site under the FAQs. For example, Nimble requires that customers give their payroll officer permission to speak to them, while Loan Ranger needs to make a quick call to the applicants employer to check that they work there.

How do I find a reputable payday lender?

Most payday lenders operate online, so customers will be able to use their website to judge their reputability. When looking at their site its relatively easy to see how transparent they are with information regarding their fee and payment structure, and also how easy they are to contact. If a website is making these things intentionally difficult, there is a chance that they could have something to hide. Applicants can also read third-party customer reviews of their services online to see other peoples' experiences with them. 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.

How do I compare payday loans?

To compare payday loans, a prospective applicant first needs to decide what their needs are as a borrower, and why they are borrowing the money. They can then compare payday loans by their rates and fees, as well as their flexibility with repayments. They can also look at how quickly the lender is able to have the money to them, and whether that meets their borrowing needs.

If anybody has any other questions, they are feel free to ask them in the comments section below, or visit our forum and discuss payday loans with fellow finder.com.au users.

Find answers to your questions

Question	Answer
What is a payday loan?	A payday loan is a small, short term loan. The loan amount is usually between $100 and $2,000 and the loan terms are usually between 16 days and one year.
Why is it called a payday loan?	It's called a payday loan because the loan amount is designed to be paid back when you next get paid. The amount you are lent is small, and you are only lent what you will receive in your income over the next month or so.
What interest and fees are charged with payday loans?	The Australian government has placed a fee cap for payday loans. As of the 1st July 2013, payday lenders are only able to charge the following fees: A one-off establishment fee which is 20% of the amount loaned. A monthly fee which is 4% of the principal loan amount. Any applicable government fees or charges. Fees or charges if you default on the loan. Enforcement expenses if the lender is forced to take you to court to recover the money you owe them.
If the fees are capped at 24%, why do people talk about interest rates that are almost 1000%?	It's important to keep in mind that lenders do not charge interest on payday loans, and are only allowed to charge fees that are expressed as a percentage of the amount you borrow. While these fees are capped at 24%, it's charged over a shorter space of time compared to other forms of credit. Most other interest, including interest on credit cards, personal loans and home loans, is charged annually, compared to payday loans which is charged monthly.
How does the interest on a payday loan compare to personal loans and other forms of credit?	As mentioned in the question above, most other credit accounts, including personal loans, home loans and credit cards, charge interest at an annual rate, whereas payday loans charge interest (in the form of fees) for much shorter period of time. In that sense, you should be considering the interest charged on a payday loan by multiplying it so you can better compare. So, if you take out a payday loan of $500 for a period of 30 days, you will be charged 24% in fees. You will pay $120 in fees, totalling $620 in principal and repayments. If you are charged 24% for one month's worth of repayment, you are essentially paying the equivalent of 288% p.a. (12 months x 24%). Remember to keep this in mind when you are considering how competitive payday loans are compared to other loans and forms of credit.
What are the loan terms for payday loans?	Payday lenders differ on the terms they offer, but the minimum terms they are able to offer you is 16 days. Lenders usually offer terms that line up with your pay structure, for instance, if you are paid fortnightly they might let you repay the loan in two fortnightly repayments, whereas if you are paid monthly you may have to pay the loan back in full when you next get paid. The lender should outline their proposed terms in a loan contract before you agree to the loan.
How quickly do I receive a payday loan?	Payday loans usually have a quick turnaround time, although the actual time is different for each lender. Upon approval, some lenders may be able to transfer you the money within 60 minutes, while some may be able to transfer you the money within one business day or more.
Can people with bad credit get a payday loan?	As these loans are small and the repayments are structured around your next payday, the eligibility criteria tends to be a bit more flexible. Although, keep in mind that lenders will still differ in their lending criteria. Most payday lenders will be more concerned with your ability to pay back the loan rather than your credit history, and so will focus more on your income and your financial activity over the last three months.
Do payday lenders do credit checks?	Some payday lender will carry out credit checks, but not all will. They will usually outline this on their website.
Are payday lenders "dodgy"?	Unfortunately, there are "dodgy" lenders who do prey on people with poor credit. In saying this, there are some very reputable lenders who may be able to offer you genuine help.
How can I stop payday lenders calling my employer?	Payday lenders may get in contact with your employer for a few different reasons, one being to confirm your employment and income amount. Therefore, a way to avoid this is to provide enough documentation when you apply so that the payday lender will not need to contact your employer. Keep in mind that this is not an option for every lender. If you want to know whether the lender will contact your employer, you can give them a call to confirm this. Some lenders also offer this information on their site under the FAQs. For example, Nimble requires that you give your payroll officer permission to speak to them, while Loan Ranger needs to make a quick call to your employer to check that you work there.
How do I find a reputable payday lender?	Most payday lenders operate online, so you will be able to use their website to judge their reputability. When looking at their site you can see how transparent they are with information regarding their fee and payment structure, and you can also see how easy they are to contact. You can also read third-party customer reviews of their services online to see other people's experiences with them.
How do I compare payday loans?	You first need to decide what your needs are as a borrower, and why you are borrowing the money. You can then compare payday loans by their rates and fees, as well as their flexibility with repayments. You can also look at how quickly the lender is able to have the money to you, and whether that meets your borrowing needs. If you have any other questions, feel free to ask them in the comments section below, or visit our forum and discuss payday loans with fellow finder.com.au users.
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.

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Comparison of Payday Loans

1 - 5 of 5

Name	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. Centrelink must not be your primary income	Go to site More Info	Compare	loading Fetching your data...
Nimble Small Loan	$2,000	62 days to 9 months	1 hour - conditions apply	$15	20% of loan amount + 4% of loan amount each month	$396	A loan up to $2,000 with terms up to 62 days to 9 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 + loan management fee of up to $399 + 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	1 to 12 months	24 to 48 hours	$35	Establishment Fee of $18 – $400	$354	A small loan between $300 and $2,000 that can be funded in 24 hours.	Go to site More Info	Compare	loading Fetching your data...
Jacaranda Finance Personal Loan	$15,000	9 to 24 months	Under 1 hour - conditions apply	$35	$249 - $990 depending on credit		Borrow up to $15,000 and get access to your funds in as little as 1 hour.	Go to site More Info	Compare	loading Fetching your data...

Compare up to 4 providers

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Bria Horne

Bria Horne is a writer for Finder, with a specialist knowledge of personal loans, car loans and business loans. Originally from the UK, Bria has been a professional personal finance writer in Australia for over 2 years. She has an M.A and B.A in Philosophy and Literature from the University of Sussex, and previously worked on the UK’s leading hospitality publication.

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8 Responses

FredNovember 27, 2018

I have a loan with Cigno. When I was approved, I agreed to have repayments taken through direct debit on the days that my benefits are payed but they have taken their payment a day early putting my account in the red. Is this allowed?

Can a lender take a direct debit repayment on a different day then agreed upon?

Reply
- finder Customer Care
  
  JeniNovember 29, 2018Staff
  Hi Fred,
  
  Thank you for getting in touch with Finder.
  
  Sorry to hear about your trouble with the direct debit.
  
  According to ASIC’s direct debits guide, there are two ways you can set up your direct debit:
  - You can fix your direct debit at a certain amount, say $70 every period
  - You can opt for a variable amount, where the merchant will deduct the exact amount of each bill.
  You can also choose if the direct debit will come out at regular intervals or set dates. If you choose a variable payment make sure you always check your bill before the amount is deducted so you know how much is being taken out.
  
  I suggest that you contact Cigno directly regarding your direct debit and seek other options to prevent this to happen again.
  
  I hope this helps.
  
  Please feel free to reach out to us if you have any other enquiries.
  
  Thank you and have a wonderful day!
  
  Cheers,
  Jeni
  
  Reply
StevenApril 6, 2017

Why do they need my personal online banking details?

Reply
- finder Customer Care
  
  HaroldApril 6, 2017Staff
  
  Hi Steven,
  
  Thank you for your inquiry.
  
  Usually, payday lenders ask for your Internet banking details because it gives them a way to access your statements. This is one way payday lenders are able to process your application much faster than banks. Instead of you emailing your bank statements from the past three months, you provide your logins and the lender can access them instantly. When you hand over your login details, the payday lender you’re applying with will use a third-party company to access read-only copies of your statements.
  
  Is it safe to give my Internet banking details?
  – Payday lenders will not have access to your bank account and neither will the third-party service that facilitates the sending of read-only copies of your bank statements
  – Your Internet login details are not stored
  – The process is encrypted and secure
  
  I hope this information has helped.
  
  Cheers,
  Harold
  
  Reply
KimberlyMay 3, 2015

Can I get a loan if I direct express. Card from ssi benefits?

Reply
- finder Customer Care
  
  ElizabethMay 4, 2015Staff
  
  Hi Kimberley,
  
  Thanks for your question.
  
  This depends on the lender you are applying with, as some will consider benefits as a form of income and some will not. Your eligibility will also depend on other factors, such as your credit history, your other active credit accounts and loans, and your general financial position. You might want to take a look at our guide to pensioner loans and loans for Centrelink recipients to better understand your options, which include lenders and also community financial assistance schemes.
  
  I hope this has helped.
  
  Thanks,
  
  Elizabeth
  
  Reply
LiamDecember 29, 2014

Can you get another cash loan on top of an already existing one ?

Reply
- finder Customer Care
  
  ShirleyDecember 29, 2014Staff
  
  Hi Liam,
  
  Thanks for your question.
  
  Due to government regulations you need to pay off your existing payday loan before being able to top up or apply for a new one.
  
  Cheers,
  Shirley
  
  Reply

Payday Loans FAQ

Our most frequently asked payday loan questions - answered

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