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Payday Loans FAQ

Information verified correct on April 25th, 2017

Have questions about payday loans? We’ve got you covered.

Before you take out any type of loan it’s important to understand how it works. The same is true of payday loans. We’ve put together some of the most common questions we’ve been asked about payday loans so you can learn a bit more about them, and find out if they’re the right type of credit for you.

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 users.

Sunshine Short Term Offer

Sunshine Short Term Offer

This is a short term loan offer with a fast and easy online application for bad credit borrowers who are employed. You can apply today to get approved for up to $2,000.

  • Loan Amount: $2,000
  • Loan Term: 9 weeks
  • Turnaround Time: 30 Minutes - conditions apply
  • Total Cost of Borrowing $100: 20% of borrowed amount + 4% of borrowed amount each month
  • Bad credit borrowers OK
  • Quick and easy Approval
  • No Credit Checks - Must be employed

    Comparison of Payday Loans

    Name Product Max. Loan Amount Term of Loan Turnaround Time Costs Product Description
    Sunshine Short Term Loans
    9 weeks
    30 Minutes - conditions apply
    20% of loan amount + 4% of loan amount each month
    Apply online with Sunshine Loans and you could borrow up to $2,000 paid directly into your account. Family Business since 1999.
    Nimble Short Term Loan
    62 days to 1 year
    1 hour - conditions apply*
    20% of loan amount + 4% of loan amount each month
    Apply for a short term loan and you could borrow up to $2,000
    Ferratum Cash Loans
    Up to 6 mths
    Same Day if approved
    20% of borrowed amount + 4% of borrowed amount each month
    A small loan from Ferratum lets you borrow up to $1,900 without a credit check
    Cash Train Loans
    10 weeks or 3 months
    1 Business Day
    20% of principal amount (establishment fee) + 4% monthly charge
    Apply for a Cash Train loan and get up to $2,000 sent straight to your bank account. Fast online application

    Compare up to 4 providers

    Warning about Borrowing

    payday-warningDo 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.

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    6 Responses to Payday Loans FAQ

    1. Default Gravatar
      safetynet | April 6, 2017

      Why do they need my personal online banking details?

      • Staff
        Harold | April 6, 2017

        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.


    2. Default Gravatar
      Kimberly | May 3, 2015

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

      • Staff
        Elizabeth | May 4, 2015

        Hi Kimberley,

        Thanks for your question.

        This depends on the lender you’re 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 this page and this page to better understand your options, which include lenders and also community financial assistance schemes.

        I hope this has helped.



    3. Default Gravatar
      Liam | December 29, 2014

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

      • Staff
        Shirley | December 29, 2014

        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.


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