Need money in a hurry? You may want to take out a payday loan
(also called a small amount loan, cash loan or quick loan). Here we
explain how they work and outline your other options.
How does payday lending work?
What is a payday loan?
A payday loan is a loan of up to $2,000 that must be repaid
between 16 days and 1 year.
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.
Alternatives to a
If you need money, there may be cheaper alternatives to a small
- 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
- Get a no interest 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.
If you do decide to go ahead and get a small amount loan, make
sure you shop around. Different lenders charge different fees, so
don't just go with the first lender you see.
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 searched online and found a small amount lender who said she
could get the money on the same day. She 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 interest loans to people.
She realised that if she had got a no interest loan instead, she
would have been $440 better off.
Who can get a cash loan?
Credit providers are required by law to lend money responsibly,
which means they must not lend you money if they think the credit
would be unsuitable for you.
There are some circumstances where it is less likely for a
lender to give you a quick loan. For example:
- You have had two or more other small amount loans in the last
- You are spending all of your money each pay and are unable to
meet your other expenses.
- You have defaulted (that is, failed to pay back by the due
date) another quick loan.
If you receive at least half of your income from Centrelink, the
repayments on all the loans you have (including the loan you are
applying for) must not exceed 20% of your income. If they do, you
will not qualify for a loan.
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. If your income is paid into more than one
bank account, you must provide 90 days of statements for each
These don't have to be paper statements. The credit provider may
accept print outs from internet banking, but they might ask you for
additional details to confirm you are the account holder.
This information will help the credit provider work out if you
will be able to meet the repayments of the quick loan.
By law, lenders must check your financial situation before they
give you a loan. 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 and type of documents a lender asks you for may
depend on whether they have dealt with you before, your credit
history and the information contained in your bank statements.
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 email@example.com
ASIC's Infoline on 1300 300 630.
What will the loan cost?
Make sure you get the best deal on your quick cash loan by
comparing the fees different credit providers charge. You could get
a cheaper loan with a different lender.
The fees and charges on payday lending are
capped (limited to a maximum amount) by the Government. Find out
what your loan will cost using our payday loan 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% (maximum) of the amount
- a monthly account keeping fee of 4% (maximum) of the amount
- 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)
Lenders are not allowed to charge interest on the loan.
Lenders are also not allowed to charge direct debit fees on any
payday loans entered into from 1 February 2017. All loans taken out
before this date are only allowed to charge direct debits fees for
the life of the loan.
This cap on fees does not apply to loans offered by ADIs such as
banks, building societies or credit unions.
Case study: Dev shops around for a cheaper loan
Dev received an invitation to attend a friend's
wedding overseas. He didn't have enough money saved up to cover the
cost of the trip, so he thought about getting a quick loan.
He used our payday loan calculator to work
out that if he borrowed $1,500 over one year, the most he would
have to repay would be $2,520 including fees. He knew it was a lot
of money, but he didn't want to miss the wedding, and he knew he
could afford the repayments, so he decided it was worth it.
Dev compared the fees charged by a few different lenders, and
found one where the establishment fee was 18%, instead of the
maximum of 20%. The loan was still expensive but, because he
shopped around, Dev was able to find one that saved him $30.
If you default on your cash loan, you will usually be charged a
default fee until you repay the outstanding amount in full.
If you do fall into default, the maximum a lender can charge you
is twice (200%) the total amount of the loan. This includes any
repayments you made under the contract plus default fees.
Before you sign the credit contract, find out when you have to
repay the loan and what happens if you miss a repayment.
What to do if you have a
problem with your loan
If you think you have been charged too much for a loan or you've
been given unsuitable credit talk to your credit provider or get free legal
advice. Find out how to complain about a payday
Our trouble with debt page also has
guidance on how to negotiate repayments with your lender if you are
struggling to with your loan.
If you need help sorting out your money problems, talk to a financial
counsellor - it's free and confidential.
Cash Converters' customer refunds
ASIC has taken action against Cash Converters because they
failed to make reasonable inquiries into borrowers' income and
expenses and signed people up for loans that were unsuitable for
Cash Converters will refund $10.8 million to consumers. If you
are a Cash Converters' customer, find out if you are due a
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: 13 Dec 2016