Australia's best payday loans

Compare payday loans from dozens of lenders. - Last updated on 19 Dec 2016

To help you make a choice about payday loans, here are some options you can consider. These are some examples of what’s available in the marketplace from selected providers.

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.

Case study

Lucy needs a car to get to her job, but it stopped working and required $1,400 in repairs that she couldn’t afford. Lucy has bad credit and just four months of employment, so she was only eligible for a payday loan after exhausting all other lending options.

Within 24 hours, Lucy received her payday loan with a six-month term and got her car fixed. Lucy paid off her debt in four months and avoided any extra monthly fees and arrears fees. She also made sure to pay her monthly balance on time to avoid late payment fees.

Lucy ended up paying the following over the course of her payday loan: $1,400 loan amount + $280 establishment fee (20 per cent on original loan amount) + $224 monthly fees (4 per cent on original loan amount) = $1,904. In the end, Lucy paid and extra $504 (36 per cent) for her emergency car repairs.

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.

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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.

Case study

Gary plays guitar as a hobby and wanted to buy a new guitar for $1,700 but couldn’t afford it. Gary has full-time employment and fairly good credit. He wanted the guitar as soon as possible, so he applied for a payday loan without exploring other lending options.

Within an hour he received the loan with a one-year term for the new guitar. Gary unexpectedly lost his job and was late on four of his payments. Additionally, he was three weeks late paying off the debt within the loan term and receive arrears fees.

In the end, Gary paid the following for his new guitar: $1,700 loan amount + $340 establishment fee (20 per cent on original loan) + $816 (4 per cent on original loan amount) + $140 late payment fees ($35 per late payment) + $90 arrears fees ($30 per week) = $3,086. Gary ended up paying an extra $1,386 (about 82 per cent) on the price of the guitar. Had he explored other options, Gary could have found a more favourable loan for this non-emergency expense.

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.

FAQs

Payday lenders can’t charge interest on payday loans. But you might be charged these fees:

  • A one-off establishment fee of up to 20 per cent of the loan
  • A monthly account-keeping fee of up to 4 per cent of the loan
  • A government fee
  • A penalty fee (if you default on the loan)

For example, imagine you took out a $1,500 payday loan with a 12-month loan term and fortnightly repayments. Here’s how much you might be charged:

  • An establishment fee of $300
  • An account-keeping fee of $60 per month (or $720 over 12 months)

As a result, your repayments would be:

  • $96.92 per fortnight
  • $2,520 in total (equivalent to an interest rate of 68 per cent per annum)

Kate is a personal finance commentator. She has been a journalist for more than a decade, most of which has been spent writing about money. Most recently, she was the Australian Financial Review's personal finance correspondent. She is passionate about personal finance and women's independence.


^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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