Want to borrow $2,000 or less?
Need money in a hurry? You may want to take out a payday loan
(also called a small amount loan or cash loan). Here we explain how
they work and outline your other options.
Is a payday loan your best
The best way to stay out of debt is not to get a quick cash
loan. Think about whether you really need the money right now,
whether there are any other options, and whether this type of loan
is right for you.
If you are in financial difficulty, there are cheaper
- Negotiate with your utility provider: If
you're having trouble paying an electricity, gas or water bill,
contact your utility provider. Most companies have hardship
officers who can help you work out a plan to pay the bill in
instalments or apply for emergency utility bill vouchers - see problems paying your
- NILS® or StepUP loan: If you're on a low
income, you may qualify for a no or low interest loan to pay
for essential household goods or personal services such as medical
- Centrelink advance payment: If you're eligible
for Centrelink benefits, you may be able to get an advance payment
on your benefits, with no interest charges - see the Department of Human
If you're in a crisis and need emergency relief or emotional
support see our urgent money help webpage.
Important: MoneySmart does not lend money
ASIC's MoneySmart website does not lend money or arrange cash
loans but is happy to answer your questions about loans and money.
Email us at firstname.lastname@example.org
ASIC's Infoline on 1300 300 630.
How does payday lending work?
What is a payday loan?
A payday loan (or small amount loan) is a loan of up to $2,000
that must be repaid between 16 days and 1 year.
Providers of small amount loans are required to display a
warning that notifies you of your other lending options before you
How do you pay it back?
You will usually repay a cash loan by:
- A direct debit from your bank account,
- A deduction from your pay
Your loan repayments will usually be deducted on the day you are
paid so make sure there is enough money in your account to cover
this repayment and your other expenses.
Ban on short term loans
'Short term' loans of $2,000 or less that you repay in 15 days
or less have been banned since 1 March 2013. For more information
about the rules that apply to these and other types of loans, see
These rules do not apply to loans offered by Authorised
Deposit-taking Institutions (ADIs) such as banks, building
societies and credit unions, or to continuing credit contracts such
as credit cards.
Who can get a loan?
Not everyone is able to get a payday loan. All credit providers
are required by law to lend you money responsibly. This means they
must not lend you money if they think the credit is unsuitable for
For example, it would NOT be responsible for the credit provider
- give you many cash loans over a short period of time as your
debts could get unmanageable
- give you credit when you are spending all of your money each
pay and are unable to meet your other expenses
What you need to give the lender
Bank account statements
The credit provider will ask you for the previous 90 days of
statements for the bank account your income (including Centrelink
payments) is paid into.
These don't have to be paper statements. The credit provider may
accept print outs from internet banking but may ask you for
additional details to confirm you are the account holder.
If you have more than one bank account where you are paid
income, you must provide 90 days of statements for each
This information will help the credit provider work out if you
will be able to meet the repayments of the cash loan you are
applying for without financial hardship.
The law requires credit providers to verify your financial
situation. They may also ask you to provide:
- payslips or Centrelink statements
- copies of bills
- copies of other credit contracts or statements of accounts
- property rental statements showing if you are up to date with
The number of documents a lender asks you for will depend on
things like whether you are already known to them, your credit
history and the information contained in your bank statements.
If you receive the majority (50% of more) of your income from
Centrelink, the repayments on the loan you are applying for
(including any other loans you have) must not exceed 20% of your
income. If they do, you will not qualify for a loan.
What will the loan cost?
From 1 July 2013, the fees and charges on payday lending were
capped (limited to a maximum amount) by the Government. Find out
what your loan will cost using our payday calculator:
Payday loan calculator
Limit on fees
While the exact fee you are charged will vary depending on the
amount of money you borrow, credit providers are only allowed to
charge you the following:
- a one-off establishment fee of 20% of the amount loaned
- a monthly account keeping fee of 4% of the amount loaned
- a government fee or charge
- default fees or charges (see below)
- enforcement expenses (if you fail to pay back the loan, these
are the costs of the credit provider going to court to recover the
money you owe them)
Credit providers are not allowed to charge interest on the
This cap on fees does not apply to loans offered by ADIs such as
banks, building societies or credit unions.
If you default, that is fail to pay back the cash loan on the
due date, you will usually be charged a default fee until you repay
the outstanding amount in full.
Before you sign the credit contract, ask when you have to repay
the loan and what happens if you can't make a repayment.
From 1 July 2013, the maximum you can be charged if you do fall
into default (inclusive of any repayments made under the contract,
including default fees) is twice (200%) the amount loaned.
Sorting out problems with loan charges
If you think you have been charged too much for a cash loan,
talk to the credit provider, see a financial counsellor or get free legal
advice on what to do. Find out how to complain or call ASIC's Infoline
on 1300 300 630.
Case study: Misty discovered she could have got a small loan
for less cost
Misty's washing machine stopped working and she
needed to buy a new one. She didn't have enough savings and had a
default listed on her credit report so
didn't think she'd be able to get a bank loan.
She saw an ad for a cash loan that said if she brought in her
bank statements she could get the money the same day. That
afternoon, she took in her statements, filled in an application and
by next morning had $1,000 in her bank account. Over the next 6
months, she repaid the loan plus fees which cost her a total of
Later, one of her friends told her about a local not for profit
organisation that offered no or low interest loans to
people on low incomes at a lower cost. She made a note of the
details for next time she needed to borrow money.
What to do if you are
struggling with repayments
If you are having trouble making repayments on your cash loan,
contact your credit provider straight away to discuss your
If you are struggling to pay off a cash loan, contact your
credit provider. See trouble with debt for advice on how
to negotiate with them.
If you need help sorting out your money problems, talk to a financial
counsellor - it's free and confidential.
A payday loan might sound like a fast cash fix,
but make sure it's the right choice for you and always check if
there's a cheaper option.
Last updated: 29 Feb 2016