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What Is a Payday Loan

Has a friend or family member suggested a payday loan to you after you told them you were short on cash? If so, you may be wondering what a payday loan is and what exactly it entails.

Understanding payday loans can help you decide if this financial solution is suitable for your circumstances and go into an agreement prepared. So here we’ve broken down what a payday loan is and how it works.

If you’d rather speak to a friendly expert to learn more about payday loans, feel free to contact our team directly.

First things first:

What does payday mean?

Payday is exactly what it sounds like: it’s the day that your salary or wages arrive in your bank account. Whether you’re paid weekly, fortnightly or monthly, your payday is the first day that your new income is available for you to spend.

Payday | Cigno Loans

What is a payday loan?

A payday loan is a small and fast cash loan (usually under $2,000*) that is paid back quickly compared to other types of loans (the term is usually between 16 days and 1 year).

*Cigno Loans can help you borrow amounts up to $1,000.

Payday loans are designed to be repaid on your next payday, which can make them suitable for covering unexpected expenses you can’t afford until your next payslip arrives.

You may have heard other people refer to payday loans as:

  • Quick loans
  • Same-day loans
  • Cash advance loans
  • Payday advances
  • Small-amount loans (this is the formal title for payday loans).

What is payday lender?

A payday lender is simply any lender that offers this type of loan. Just like all credit providers, payday lenders are legally required to lend money responsibly. This means doing adequate checks to ensure the loan they provide is suitable for you.

Quick note: Cigno is not a payday lender. We’re a team of short-term finance specialists who work with payday lenders to find you the right product. We always encourage our customers to only borrow when they need to and only amounts that they can afford to repay.

Are payday loans “bad”?

A payday loan isn’t always an appropriate financial solution. However, there are plenty of circumstances where a small cash loan is a valid and effective way of meeting immediate expenses.

While some payday lenders in the past have acted unscrupulously and tarnished the industry, payday loans remain a legitimate solution for people who need small amounts of money quickly and are in the position to comfortably repay the loan in the near future.

Where can I learn more about payday loans?

ASIC’s MoneySmart website has a thorough resource on payday loans that can help you determine whether this is a suitable option for you, and you’re always welcome to contact our specialists to find out more and discuss your options.

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.

NOTIFICATION OF MISCONDUCT BY CIGNO AUSTRALIA

Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice – Moneysmart.gov.au.

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat