You can take out a payday loan (short-term loan or cash loan) and get an access to funds on the same day if you’re running out of cash. Payday loans in Australia are like short-term loans which offer small loan amount, usually up to $2,000 and must be reimbursed between 16 days and 1 year. The distinction between short-term loans and payday loans is the number of payments you make.
Disbursing a payday loan can be done through direct debit from your bank account or can be deducted from your salary. Your reimbursements will normally be deducted on the day you get your paycheck, so ensure there is sufficient money in your bank account to avoid defaulting and to cover this and other costs.
Who is qualified for payday loans?
Responsible lending is mandated by law and lenders are required to abide by it and it’s regulations. Encompassed in this is for the lender not to loan cash to borrowers who cannot handle the repayments.
Other conditions where lender won’t approve your loan application are:
- If you have another payday loans in the last 3 months.
- If you defaulted (failure to repay a loan according to the agreement) another payday loan.
- If all of your money are being used up for repayments and not much is left for other expenses.
If 50% of your income is from Centrelink, the reimbursement on all your existing loans ( loan currently applied for included) should not exceed your income by 20%. In this case, there’s a minuscule chance for the loan.
Fees and charges vary depending on the lender, so it’s best practice to compare your options to get the best payday loan deal.
Requirements for Payday LoansBank account statements Your current 3-month bank account statement will be required by the lender. This account is where your salary is directly credited to. If your salary is paid into more than 1 account, you will need to prepare and supply the bank statements separately. Printouts from online banking may be accepted as long as you can give other supporting details to prove that you are the account holder. The data will help the lender in assessing your payday loan application. Additional documents Lenders may also ask for original documents or copies of:
Data in your bank account statements, your credit file, and whether you are a first time borrower may indicate the type of documents you will need to submit. |
Payday loan cost and charge limits
Charges and fees on payday loans are capped by the Australian government. Generally, the fees included in a payday loan are: establishment fee (20% of the loan amount); monthly account keeping fee (4% of the loan amount); government charge; default fee; and enforcement expenses. Lenders are not permitted to charge interest on the loan.
Since the 1st of February 2017, permission to charge direct debit fees on payday loans has been revoked. Prior to this, all direct debit charges are applied for the life of the loan. Banks, credit unions, building societies, or other Authorised Deposit-taking Institutions (ADI) are excluded from this cap on fees.
To have a better idea on charges and fees, check Cigno’s payday loan product and the Disclosures and Authorisations.
Access to funds from payday loans may come on the same day and with different cost. If you’ve made your decision and you want to acquire this type of loan, be sure to check the contract first before signing. Find out the loan terms and what happens when you default and only get the loan you can repay.
Payday loan alternatives
If you require cash, there might be other options for you at a lesser cost. Consulting with your utility suppliers is a good start. If you’re experiencing difficulty in paying your bills on water usage, electricity, or gas you should talk to your utility suppliers. They have hardship officers who can make an arrangement on how to pay your bills — it can be that you can pay in portions or apply for utility allowance.
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You can also look for and get a low or no interest loan. There’s a better chance in qualifying for this if your salary is low, particularly if you use the money for paying the essentials (household expenses, hospital bills, and other regular invoices).
Another option for payday loans is Centrelink advance payment. If you are qualified, you’ll probably get an advance payment, in which you won’t be charged. There are other forms of emergency relief, income support, and social services that the government provides. To search for relief providers near you, use the Department of Social Services Grants Service Directory.
Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.