Payday loans

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 option?

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 alternatives:

  • 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 utility bills
  • 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 treatment
  • 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 Services website

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 or call
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 borrow money.

How do you pay it back?

You will usually repay a cash loan by:

  • A direct debit from your bank account, or
  • 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 consumer credit regulation.

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 you.

For example, it would NOT be responsible for the credit provider to:

  • 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 account.

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.

Other documents

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 your rent

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.

Centrelink recipients

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 loan.

This cap on fees does not apply to loans offered by ADIs such as banks, building societies or credit unions.

Default fees

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 $1,440.

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

Smart tip

If you are having trouble making repayments on your cash loan, contact your credit provider straight away to discuss your options.

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.

Related links

Last updated: 29 Feb 2016