Payday loans may be a good short-term loan option if you have a steady income and need just a small amount of money.
A payday loan is a short-term, high-interest loan that offers a different style of personal finance as an alternative to traditional borrowing methods. Whether you need money for managing bills or other expenses before your next pay arrives, a payday loan may be the answer. You can apply for payday loans online and if approved, receive funds within minutes of approval!
Fast and Easy isn’t Always Good
Payday loans are fast and easy, but that doesn’t mean they’re good for you. If you are experiencing money problems and you need to borrow money in a pinch, it might be better to consider other options before turning to payday loans.
That said, here’s what you need to know about payday loans so that you can make an informed decision on whether or not these emergency loans are right for your situation.
What We’re Going To Talk About
This post discusses payday loans and how they work. These are small personal loans that can be obtained from a payday lender when cash is needed quickly but you don’t have any time left before your next pay arrives.
This post will explain the process of getting approved for a payday loan, what happens after you’re approved, and how much it costs to get a payday loan. We’ll also talk about some problems with payday loans and possible alternatives if these loans aren’t the best option for you!
Tell me the difference between payday loans?
There are a few key distinctions between payday loans and other types of consumer credit. Payday loan amounts are considered short term unsecured loans that typically must be repaid in full on the borrower’s next payday. They’re often used to cover unexpected expenses or to bridge a financial gap until the next pay day arrives.
There’s No Shortage of Options
Other types of fast-access consumer credit include credit cards, home equity loans, lines of credit, and a variety of high-interest personal loans. These fast access high-interest personal loan types are often referred to as cash advances, fast cash loans, quick cash loans, same day loans, and of course payday loans.
People use these forms of credit for a variety of reasons: most commonly because they’re having temporary difficulty managing bills or other financial obligations and need time to get back on track without facing debt collection.
What are Payday Loans?
A payday loan is a short-term, high-interest small loan that offers an alternative to traditional borrowing methods. Whether you need quick cash for managing bills or other money problems until your next paycheck, a payday loan may be the answer. You can get most payday loans online and if approved, receive funds within minutes of approval!
Here are some of the attractions of payday loans:
- Faster access to cash – you can receive funds within minutes of approval!
- No credit file report required – a payday loan can be an option for those who have bad or no credit.
- Easy payday loans online application process – you can apply anytime, anywhere.
- So if you need a fast small loan in a hurry, payday loans can provide it. If approved, your funds can normally be deposited directly into your bank account within minutes!
I’ve never taken out a payday loan before. What do I do?
If this is your first time taking out a small loan, it’s important to understand the application process before you apply. The entire application will likely take place online, so make sure you have all your personal documents and financial details handy.
They may want information on things like minimum income, employment conditions, government benefits eligibility, look at bank statements, and possibly a credit enquiry. You can also get an idea of the repayments by using this payday loan calculator.
Research can Pay Dividends
Each lender’s products will have variations, so ensure you read and thoroughly understand each step of any loan contract. Make sure you’re comfortable with how these loans work.
The first thing you need to do is find a reputable payday loan provider. Do some research online and compare interest rates, fees and other features like how long you have to repay the loan and whether you need a credit check.
It’s an Australian Government requirement that small loan lenders in Australia must follow responsible lending practices, including holding an Australian credit licence. Or, if they’re a finance broker they have the minimum of a credit representative number.
What They Will Want to See and Know
Once you find the right lender, fill out their loan application form and make sure to provide all of your financial details like income information on Government benefits (Centrelink) eligibility. Some lenders may ask for different documents as proof such as payslips, ID documents, billing statements, bank statements, check your credit score, etc.
Another Australian Government requirement requires participating Australian financial institutions to make suitable inquiries into your financial situation to find out whether or not any loan they offer is suitable (affordable) for the applicant.
This is Why They’re Called Fast Payday Loans
Once approved, some payday lenders will deposit the requested loan amount into your savings/cheque account straight away, while others may require you to pick up the cash in person. Make sure you know what to expect before signing any contracts or agreeing to anything.
When it comes time to repay the loan, most lenders will automatically direct debit your bank account on the agreed date. However, if something unexpected happens and you can’t make the repayment, most lenders have flexible payday loans and will try and work with your financial situation to create a workable payment plan. Just remember that late payments can incur extra fees and interest, so it’s best to stay on top of and make repayments on time.
That said, it’s also an Australian Government requirement that lenders must follow responsible lending practice regulations and do everything within reason to help co-operating borrowers who find themselves floundering financially but who want to get back on track.
Never be Too Proud to Ask for Help
If you’re still not sure what to do or need more help, don’t hesitate to contact the lender directly or seek free independent advice from a professional.
It’s important if your financial situation deteriorates that you be upfront with your creditors and contact them to let them know right away if you can’t make a required payment or you’re going to be late. So, if you’re having money problems, but subsequently you procrastinate and let your account go delinquent without communicating, creditors are less likely to negotiate new terms and in many cases not negotiate at all.
If you’re considering taking out a payday loan, make sure you understand the loan terms and what to expect before signing any credit contract. Importantly, by making your repayments on time you can avoid nasty additional penalty fees and interest charges.
What can I use payday loans for?
Payday loans can be used for a wide range of purposes. There are usually not too many questions asked when it comes to what you want to use the money for. Generally, they are used for unexpected emergency expenses. Common uses include forgotten bills, car repairs or urgent medical expenses.
Handle With Care
However, payday loans should only be used as a last resort when you can’t cover your expenses any other way. If you’re considering a payday loan, they may not be the best option for unexpected expenses, but you can compare available loan amounts, interest rates and fees from different lenders before deciding whether or not this is a good choice.
What’s the difference between a personal loan and a payday loan?
The main difference between a payday loan and a personal loan is the basic terms. A payday loan is an extremely short-term loan usually due within a month or less, while the term for a personal loan is at least 6 months and commonly for longer periods.
In addition to the large difference in the length and loan size of term loans, small payday loans are much more expensive than personal loans. Personal unsecured loan lenders charge interest rates that can be relatively quite low, while most payday lenders charge a comparison rate of 300% percent or higher for their short-term loans.
Short Term Gain can Become Long Term Pain
This makes the effective cost of borrowing money from a payday lender extremely high if you borrow any significant amount of money from them. Because they have such short repayment terms, if you default, it’s very easy to get stuck paying back several times what was originally borrowed through these kinds of predatory lending schemes. It’s important to remember that payday loans are not a good solution for long-term financial problems, and should only be used as a last resort.
They can be useful in an emergency and if you have no other options. However, your strategy should be, loan today – gone tomorrow. In other words, get in and out as quickly as you can, so you don’t get trapped in a debt web.
There May Be Cheaper Alternatives
If you’re looking for an alternative to small payday loans, personal unsecured loans can be a great option. These loans come with much lower interest rates than payday lenders charge, meaning the total cost of borrowing will be much lower in the long run. You’ll also have more time to repay the loan, which can make it easier to budget your money. So if you’re in need of some quick cash but don’t want to get stuck in a cycle of high-interest debt, a personal unsecured loan may be the right choice for you.
You can do internet searches for those kinds of unsecured loans no matter whether you have a clean credit file or not. Bad credit applications of course will attract higher interest and fees.
What is the biggest problem with payday loans?
The biggest problem with payday loans is the cost. Interest rates are very high making it difficult for some to make the required payday loan repayments on time. This traps borrowers in a cycle of debt that is difficult to break. It draws out the loan that started out short-term and often, creates the need for another payday loan.
How to Avoid Becoming Another Victim
Beware of lenders that prey on people who are already struggling financially. They know that these borrowers may not be able to repay the loan quickly so they tack on additional fees and interest rates which can add hundreds of percent to the true rate or comparison rate. This can cause serious financial hardship for borrowers who are already living pay day-to-pay day.
There have been cases where people have had to take out multiple payday loans just to cover their basic expenses. This can quickly lead to a debt spiral that is difficult to break free from.
There May Be Another Way
If you’re considering taking out a payday loan, be sure to do your research first. Compare the interest rates and fees of different lenders before you commit. There may be other options available to you such as borrowing from friends, family, using a credit card, or an interest-free Government subsidy loan. If you do decide to take out a payday loan, be sure to pay it back on time so you don’t end up in a debt spiral.
how does a No Credit Check Payday Loan Work?
Instant payday loans with no credit file check are approved by many lenders without conducting any credit history check at all. This means that borrowers with a bad credit history or no credit history can still be approved for a loan. Lenders may well check other factors such as your income and employment history.
Most no credit history check loans are typically for small loans, often with shorter repayment terms. Applications can be processed as payday loans online on the chosen provider’s website usually after being approved for an application over the phone.
Are Fast Payday Loans What They Say They are?
If you are approved for a no credit check payday loan, the money will be deposited into your bank account immediately and your repayment schedule will begin on your next scheduled payday.
Many payday lenders also offer installment loans with longer repayment terms if you’re going to need more time to pay back your loan.
Taking Out a Quick Payday Loan Requires a Sound Re-Payment Plan
That aside it is, without doubt, important to note that these instant payday loans with no credit check tend to come with much higher fees and charges than traditional loans. Also, keep a lookout for any possible hidden fees.
We’re Not Saying, Don’t Do it!
That’s right, we’re not saying, don’t do it, but it is important to carefully consider whether taking out a payday loan with a no credit history check product is the right decision for you. If you do decide to go ahead with a payday advance, be prepared to pay back your payday advance in full as soon as your next paycheck arrives.
Otherwise, your overall accumulated payday loan costs of steep late payment fees and charges can go through the roof and start edging you ever closer to a debt trap.
Can I Get a Cash Advance Using Bad Credit Payday Loans?
The way these loans work is you can get a payday loan even if your credit is bad. In reality, bad credit payday loans are available to anybody with almost any level of credit score. Payday loans, unlike most financial products, aren’t solely reliant on your credit rating. These lenders evaluate your current income and expenses to see if you’re capable of repaying the amount borrowed plus the interest and fees being charged within the given time period.
They Will Look for Other Good Qualities
If you have a steady income and can afford to repay the loan amount plus fees in two weeks or less (or by your next scheduled pay day), then you’ll likely be approved for a cash advance from a payday lender.
Most lenders will look at other factors such as your income and employment history when considering a loan application. So even if you have poor credit, there’s a good chance you’ll still be approved for one of these small payday loans.
Nonetheless, always keep front of mind, the way these loans work is, they have higher interest rates than traditional bank loans. As a result, it’s advisable to compare numerous lenders before making a selection. Also, ensure you keep track of what your loan repayment schedule responsibilities are before signing anything, so you can pay on time and avoid being hit with expensive penalties.
Is There Such a Thing as Weekend Payday Loans?
Yes, weekend payday loans are a real thing! A lot of people might be surprised to learn that you can actually get a loan funded as early as Friday and have the money in your account by the time the weekend starts. Weekend loans are short-term finance options allowing you to borrow from $300 to $5000 and have the money transferred into your account before the weekend starts.
Check for Conditions
However, to access weekend payday loans, normally it is important that you apply for the weekend loan during business hours and before 2.30 pm on a Friday, assuming Friday isn’t a public holiday. Of course, not every lender is going to offer a weekend cash loans service.
You will also find lenders offering no credit check weekend loans and bad credit weekend loans.
If you’re in need of some extra cash before the weekend starts, be sure to check out your options for weekend loans online. These short-term finance options can provide you with the money you need quickly and easily, so you can focus on enjoying your time off. Compare interest rates from different lenders to find the best deal for you, and don’t hesitate to apply if you need some extra funds urgently.
Once Approved, You’ll Get Fast Access
These can be a great option for those who need some quick cash for an emergency or unexpected expense. Once approved, the money will usually be deposited directly into your account so you can use it however you please.
A quick tip: If you’re looking for a fast personal loan, make sure to do a comprehensive check online for the best online personal loan lenders. Many offer competitive interest rates and some even have no origination (establishment) fees!
Frequently Asked Questions (FAQ’s)
How do You Work Out the Interest Rates and Fees On Small Payday Loans?
When you calculate the costs of small payday loans you’re typically talking about ones that range from $200 to $2000. They usually have a minimum duration of around 14 days and a maximum period of 90 days. The startup fee (establishment fee) is 20% of the loan amount, as well as monthly fees of 4% each month. Lenders will want to put a payment plan in place that matches your pay cycles to your required repayment amounts.
Here is a Typical Calculation for Small Payday Loans
For example, if you take out a loan for $500 over three months, the initial charge would be an initial establishment fee of $100 and the monthly charge would be $20 each month, for a total of $60 in monthly fees (3 months X $20).
Putting it all together for a total payback amount you would have $500.00 plus $100.00 plus $60.00 Total =$660.00. That means you will be up for monthly repayments of $220 each month =$660.00.
Note: A lot of the small payday loans show a Nominal Percentage Rate of 0%, because many of those small payday loans are fee-based.
Here’s the Calculation for a Medium Size Loan
A medium loan is one that is greater than $2,000 but less than $10,000. It has a duration of at least 62 days and was originally designed to meet the demand for shorter-term cash flow adjustments. On average, a $400 initial establishment fee is charged to open an account, and there’s an Annual Percentage Rate (APR) of 48 percent, which equates to a Comparison Rate of 65.4962 percent.
As an example, a loan of $3,000 spread out over three months would carry an establishment charge of $400 and interest costs of $275.60. Keeping in mind interest is charged on the declining balance.
Calculating what you would have to pay back would include: $3,000.00 (the initial loan amount) plus $400.00 plus $275.60 Total =$3,675.60. This equates to a repayment of $1,225.20 a month for 3 months.
The above is being used as a payday loan cost example only. We would encourage you to do your own calculations with any lender you select.
What is a Comparison Rate?
When you work out the comparison rate for any type of loan you have to follow set rules that can be a little confusing.
* Warning the comparison rate of 65.4962% shown above (based on the rules) was worked out on a loan amount of $2,500.00 spread over two years. The calculations included the $400.00 establishment fee and assumed weekly repayments were being made.
That said, you’re probably not going to find a lender that will do payday loan terms over two years.
Note: As interest on most loans is calculated on the daily balance, including weekly repayment calculations could marginally reduce the comparison rate shown.
Are There Better Alternatives to Payday Loans?
There are a number of better alternatives to payday loans, depending on your individual circumstances.
- Consider a Payday Alternative Loan (PAL), which offers smaller loan amounts and more manageable payments.
- You can also apply for a “bad credit” personal loan from a variety of sources, including banks, credit unions, and online lenders.
- If you have any family or friends who could lend you money interest-free or at a low-interest rate, that might be another option to explore.
- Your creditor may also offer payment plans if you’re behind on your bills; this is something you should discuss with them as soon as possible.
- If you’re struggling with debt, consider talking to a credit counselor for help getting back on track.
Here are Some More Possibilities
If the above suggestions aren’t going to work for you and you need money quickly and don’t have any other options;
- Consider getting a side hustle to bring in some extra cash.
- If none of these solutions work for you, then a low-interest credit card might be a bet. There are several credit cards available that offer 0% rates on purchases or balance transfers for a certain amount of time. If you’re able to pay off your debt within that time frame, it can be a great way to save money on interest payments.
- Another option is Lending Circles, which are offered through community organizations and allow borrowers to borrow from a group of people with pooled resources. This can be helpful if you have poor or no credit. Try an internet search for this option.
If you need money right away to settle a debt or cover other costs, there may be alternatives other than supporting the predatory payday lending industry.
Depending on your personal situation and how much you need to borrow, there are a variety of options., they could potentially include:
- No-interest loans – Small loans from certain banks are available to low-income families to pay for agreed services, for example medical care or training.
- Ask Centrelink for an advance payment -If you’re on Centrelink payments, such as the Newstart Allowance or Family Tax Benefit, pension, etc., it’s possible to request a lump sum payment in advance. This will be repaid in installments out of future payments with some interest.
- Try contacting your utility provider – if you’re having trouble making your bill payments, you may be able to arrange a more affordable installment plan with your utility company.
- Non-conforming loans – If your application to the big banks has been denied, you may be eligible for a non-conforming loan from other lenders if you meet certain conditions. Annual percentage rates (APRs) are typically higher than those of a normal loan, but lower than those of payday loans. With larger loan amounts accessible. As an alternative to payday loans, they tend to have better interest rates.
A Debt consolidation loan could be an option – if you’re struggling to pay back multiple loans, credit cards or other payments, those could be combined into a single consolidation loan with a more affordable monthly payment, helping to make your finances more manageable. If you have multiple loans, credit cards or other payments that you’re having difficulty repaying, think about consolidating all of them into one single consolidation loan with a more manageable single monthly payment to substantially help free up some of your cash flow.
Can I Get a Payday Loan While On Government Benefits?
Government benefits are designed to provide support to those who cannot work or need extra help. It is not unusual for those receiving benefits to also need a little extra money.
For example, you might lose your job and then receive unemployment assistance or other Government benefits that will help you financially while looking for the next job.
There’s No Hard and Fast Answer
While it’s possible to get a payday loan as someone on government assistance, there are many factors involved – such as how much of your income comes from benefits versus what you earn yourself – which means we cannot provide an answer one way or another without more information about your individual circumstances.
There is no simple answer to this question as it largely depends on your individual circumstances. In most cases, receiving Centrelink benefits in itself will not keep you from being eligible for a payday loan. However, if more than 50% of your income comes from benefits, your chances of getting accepted for a payday loan will decrease.
This is because most lenders are often cautious about lending money to those who rely on benefits as their main source of income, as there is a greater risk that they will not be able to repay the loan.
Speak Directly to the Source
So, if you’re receiving government assistance and you need a payday loan, it’s best to speak to a lender directly to see if you are eligible. They will be able to take a closer look at your financial situation and make a decision based on that.
Payday loans are not always the best option – they can be expensive and should only be used as a last resort. It’s important to explore all of your options before deciding whether or not to take out a loan.
What can I do to Avoid Payday Loans?
Taking out a payday loan is one of the most expensive ways to borrow money. A two-week payday loan with a fee of $15 per $100 borrowed would result in fees equivalent to an annual percentage rate (APR) of nearly 400%. By comparison, credit cards have an average APR of around 16%.
When you take out a payday loan you end up with one of the most costly methods to borrow money. A $15 per $100 fee for a two-week payday loan would result in fees equivalent to an annual percentage rate (APR) of almost 400 percent. Credit cards have an average APR of around 16 percent.
There are several steps you can take to avoid needing to take out a payday loan:
- Create and stick to a budget. This will help you keep track of your spending and make sure you have enough money each month to cover your expenses.
- Try to build up an emergency fund. This will provide you with some cushion in case something unexpected happens and you need extra money quickly.
- Use a credit card instead of a payday loan. Credit cards typically have lower interest rates and don’t require you to pay back the entire balance at once.
If you must take out a payday loan, be sure to pay off the loan as quickly as possible so you don’t end up paying too much in fees.
What can I do to Avoid Payday Loans?
There are some possibilities worth exploring
If you are finding it difficult to make ends meet, there are other options available to you. You could consider a no-interest loan from the Australian Government. Based on meeting qualifying criteria you can borrow up to $1500 for essential items like car repairs or a fridge. You must have a Health Care Card or a Pensioner Concession Card or an after-tax income below $45,000.
You only repay what you borrow. There is no interest or fees. See the Government website for more information on how to get one of these loans.
Alternatively, you may be able to access financial assistance from Centrelink. For more information, please visit their website or call them on 13 23 00.
Whatever option you choose, we hope that you are able to find a solution that meets your needs.
What are Good Debt Management Tips?
First of all, if you would like help with your finances there is free help available to you.
You can get free financial counselling through the Australian Government at the following website, click here. https://moneysmart.gov.au/managing-debt/financial-counselling
Get Rid of Debt – Improve Your Quality of Life
Debt can be a huge weight on your shoulders, but with careful financial planning, it doesn’t have to be. A debt management plan is one way to get your debt under control and start working toward eliminating it completely.
Here are some tips to help you get started:
- Create a budget and stick to it. This is the cornerstone of any good financial plan. When you know where your money is going, you can start making smarter choices about how to use it.
- Negotiate with creditors . If you’re having trouble making payments, call your creditors and tell them how much you can pay. They may be willing to work with you, especially if it looks like your financial situation is only going to get worse without their help.
- Consolidate debt . If your current debts seem overwhelming or too difficult to tackle on your own this might be a good option for you. You’ll need at least fair credit in order to qualify for debt consolidation loans , but the lower interest rates and lack of fees often make consolidating worth it—especially since most creditors don’t offer these kinds of programs themselves anymore.
Tackle the Big Ones First
Work toward paying off high-interest debt first. The faster that loan gets paid off, the more money you’ll save over time so prioritize ridding yourself of those debts as quickly as possible.
It is important to know how debt management can be beneficial for you. Debt consolidation, budgeting, negotiating with creditors, or reaching out for free financial counselling are all ways that your debts may get reduced or eliminated completely.
Good Luck and all the best!