Learn about payday loans in Australia

What is a payday loan?

A payday loan is a high-cost short-term loan of up to $2,000 that is usually paid to the applicant within 24 hours.

These loans are typically reserved for emergency situations such as medical treatment, home repairs and car repairs.

The term ‘payday loan’ implies that the borrower intends pay back the lender through future income.

Payday loans tend to come with high fees, which is why they should only be used for emergency purposes.

What is a bad credit payday loan?

Bad credit payday loans enable Australians with bad credit to borrow money from payday lenders.

Payday lenders have different criteria than major banks when giving loans, making them more lenient towards those who have bad credit.

Legit payday loans for bad credit involve a lender looking at the borrower’s employment situation in addition to any other income such as Centrelink payments.

Who offers payday loans?

Payday loans are offered by multiple financial institutions willing to take on the risk usually associated with high-cost short-term loans. Payday lenders tend to be small, non-bank institutions rather than well-known banks.

How do you take out a payday loan?

Many payday lenders offer loans through an online or phone application process.

In addition to providing personal details and confirming identification, borrowers will also need to provide banking details and evidence of income.

After a quick credit check by the lender, most loans are assessed and - if approved - delivered within 24 hours.

Payday loans for bad credit instant approval are possible, but a severe history of default from the borrower could end in the application being rejected by the lender.

How long does it take to get a payday loan?

Most payday loans will be deposited into the applicant’s account within 24 hours.

Given the nature of these loans (e.g. emergencies), some payday lenders can also deliver cash to the lender’s bank account within minutes.

The time it takes to receive a loan can be affected by the applicant’s credit history. Borrowers seeking an urgent payday loan with bad credit could see a longer application process.

What are the pros and cons of payday loans?

The pros of payday loans are:

• Get cash quickly for emergencies
• Convenient application process
• Loans are available for those with bad credit
• Unsecured loans available (no collateral needed)

The cons of payday loans are:

• High application and account-keeping fees
• One of the most risky methods of borrowing money
• Potential of worsening borrower’s financial situation
• High late payment and default fees

Because it can be quite expensive to pay off a payday loan, borrowers are encouraged to exhaust all other options first. Payday loans should only be used in emergency situations when no other options are available.

Can you get a payday loan if you're on Centrelink?

Yes, Centrelink recipients are able to receive payday loans under certain conditions.

The loan must not exceed 20 per cent of the applicant’s income if the borrower receives at least half of their income from Centrelink.

Borrowers can apply for payday loans with bad credit on Centrelink as long as they meet the above criteria.

Can self-employed people get payday loans?

Yes, self-employed people are able to receive payday loans as these lenders tend to be more flexible than major banks.

However, applicants who are self-employed will need to provide a history of income.

Borrowers will usually need to provide the payday lender with bank statements from the last 90 days.

Payday loans for self-employed people with bad credit can be obtained by applicants who can prove a solid history of income.

What are the best online payday loans for bad credit?

The best payday loans for people with bad credit in Australia are those that meet the borrowers needs but give reasonable expectations to pay off the debt.

Here are some things applicants should look for:

• Maximum loan amount – this is the highest amount of cash that can be given to the borrower. Applicants should ensure the funds they receive will adequately cover their emergency financial needs.
• Loan term – this is the amount of time the borrower will have to pay off their debt. A longer loan term should mean lower monthly bills, but this also means more monthly fees and more money out of pocket for the duration of the loan.
• Turnaround time – the amount of time it should take for the applicant to receive their cash from the lender.
• Establishment fee – this is a one-time fee applied to the original amount loaned. This is a percentage of the loan and cannot exceed 20 per cent.
• Monthly fee–- this is a monthly fee represented as a percentage of the original amount loaned. The monthly fee cannot exceed 4 per cent.
• Late payment fee – amount owed if the monthly bill is not paid on time.
• Arrears fee – amount owed monthly or weekly if the debt is not paid off within the loan term period.
• Requirements – these are the criteria the applicant needs to meet in order to be a successful applicant. Such requirements include being at least 18 and being employed.
• Centrelink availability – this describes which lenders give loans to applicants who are on Centrelink. Borrowers with at least half their income from Centrelink cannot receive a loan that exceeds 20 per cent of their income.

What are some alternatives to payday loans?

Given the notoriously high fees that come with most payday loans, it is recommended that borrowers exhaust all other options first. Here are some available alternatives:

• Centrelink advance – some borrowers will find they can get an advance on their Centrelink payment with no interest fees.
• No-interest loan – borrowers with low income might be eligible for a no-interest loan. These loans are not for cash, but can help with things such as household goods and health items that range from $300 to $1,200.
• Low-interest-rate credit card – most credit limits available should cover the applicant’s financial needs. Interest will be owed on the credit debt, but this should still be more affordable than the high fees associated with a payday loan.
• Personal loan – the interest rates on personal loans are typically more favourable than the fees of a payday loan.
• Request an extension – a potential borrower who is in an emergency financial situation could potentially get an extension on their bills.

Payday loans are expensive and should only be sought in the event of an emergency after all other lending options have been exhausted.

Those who are under economic stress are advised to seek financial counselling or contact the National Debt Helpline for assistance.