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Small loans vs medium loans: What you need to know

Information verified correct on October 26th, 2016

Higher loan amounts are becoming available from Australia's short-term lenders. Find out what the difference is between a small and a medium loan.

Short-term and smaller lenders have been offering a wider range of loans recently, with many increasing their loan amounts and extending their loan terms. While small amount credit contracts (SACCs), commonly referred to as "payday loans" or short-term loans, are still widely used, medium amount credit contracts (MACCs) are becoming more common. This short guide will take you through what you need to know about each type of loan, and how to work out which is better for you.

Small amount credit contract (SACC)Medium amount credit contract (MACC)
  • Known as short-term loans, payday loans and small loans
  • Loan amounts of up to $2,000
  • Loans repaid between 16 days and one year
  • Referred to as personal loans
  • Loan amounts of between $2,001 and $5,000
  • Loans repaid between 16 days and two years

What's a SACC?

A small amount credit contract (SACC) is the technical name for a loan than is up to $2,000 with repayment terms of between 16 days and one year. These loans are commonly called short-term loans, payday loans or small loans and are heavily regulated by the Australian Securities and Investments Commission (ASIC).

What's a MACC?

These are often called personal loans and refer to any personal loan amount of between $2,001 and $5,000. While SACCs are offered by the majority of short-term lenders, larger loan amounts of up to $5,000 are becoming much more common. Any lender offering a MACC must structure fees and interest rates according to ASIC's set regulations (see below).

What about loans larger than $5,000?

Loans above $5,000 fall into a third category. Any personal loan above $5,000 or with a term longer than two years falls into this category, and lenders must comply with the ASIC fees and interest rates cap (see below).

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Rates last updated October 26th, 2016
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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 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 much do these loans cost?

  • Establishment fee of 20% of the loan amount
  • Monthly account-keeping fee of 4% of the loan amount
  • Default fees and enforcement expenses if you don't repay the loan
  • One-off establishment fee of $400
  • Maximum annual interest rate of 48%, which includes all other fees and charges
Loans over $5,000
  • Maximum annual interest rate of 48%, which includes all fees and charges

Do banks have to comply with the ASIC fee caps?

No. The fee caps set by ASIC on SACCs, MACCs and loans over $5,000 do not apply to Authorised Deposit-taking Institutions (ADIs), which include banks, building societies and credit unions. You can check the full list of ADIs on the Australian Prudential Authority's website.

Which providers offer SACCs and MACCs?

These loans are offered by non-bank lenders that usually offer specialised loans. Most lenders operating in the short-term credit space are not ADIs and are therefore restricted by the ASIC caps above. The majority focus on SACCs and MACCs but there are larger loans available too.

Image: Shutterstock

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