How to Compare Payday Loans

Payday loans are popular in Australia—almost every lender gives them out. Among your choices, how can you choose the best payday loan that fits your needs? 

Well, you just need to compare what they offer, and you’ll find your guy. 

If you’re unsure how to do so, you’ve come to the right place. We’ll tell you exactly how to compare payday loans. We’ll also cover other important information you need to know about payday loans.

What this article covers:

• Comparison Payday Loans Guide
• Why Do Payday Loans Have Fees and No Interest Rates?
• How Much Should a Payday Loan Cost in Australia?
• Eligibility Criteria of a Payday Loan
• How to Apply for a Payday Loan
• Information and Documents Needed for a Payday Loan Application
• Pros and Cons of Payday Loans
• Can You Take Out a Payday Loan If You’re on Centrelink?
• Can You Get a Payday Loan If You Have Bad Credit?

Comparison Payday Loans Guide

Before settling on a lender, you must compare all loan offers on the market. That way, you can choose the loan with the best terms and avoid greedy loan providers. 

Here are some of the items you need to keep in mind before deciding on a payday loan:

Fees

Payday loans usually can’t exceed the $2000 mark. For small loans, lenders are prohibited from charging an annual interest rate on payday loans. Instead, they apply certain fees that are controlled by the Australian Securities & Investments Commission (ASIC). These fees include:

Establishment Fee

An establishment fee, or an administration fee, is charged so that you can sign your contract and set up the loan.

It covers things like credit assurance, assessment, and the verification services employed to process your application. An establishment fee is a one-time thing, but it needs to be paid upfront. It is also non-refundable. 

According to the ASIC, the most a lender can charge for a payday loan equal to or under $2000 is 20% of what you borrowed. While most lenders go with the maximum fee, some may go a little lower. Any lender who tries to go higher is breaking the law, so avoid them at all costs. 

Monthly Fee

With each passing month of your loan, lenders will charge what’s known as a monthly maintenance fee. As per ASIC regulations, this fee cannot exceed more than 4% of what you borrowed.

So, if you’re planning to go with a long loan term, try to find a lender who offers a percentage lower than 4%. That way, you can save some extra money. 

Late Payment Fee 

Just as the name implies, a late payment fee is an amount you pay when you fail to make a repayment when it’s due. This fee can vary from one lender to another, sometimes reaching up to $7 per day. 

With time, this can add up to a rather large sum. So, make sure your lender is offering you a reasonable late fee. 

Late payment fees are also known as dishonour or default fees. 

Loan Term

Most payday loan terms range from 16 days to 1 year. So, the exact timeframe for repaying the loan will be up to you. There is a hiccup, however, when you repay the loan before its due date. 

You see, paying the loan early means you won’t need to pay the remaining monthly fees. However, some lenders don’t like it when you do this because they won’t be able to make as much money as originally planned. So, they attach what’s known as early repayment charges, which can be quite steep. 

So, check with each lender what their policy on early loan repayment is. 

Turnaround Time

Another thing to keep in mind when choosing a lender is the turnaround time. Some lenders will approve your loan in less than 60 minutes. Others may require a full day or more before sending you the money. The time depends on how thoroughly the lender will review your application and how busy they are. 

So, if time is important to you, ask when you can receive the money before settling on a lender. 

Lender’s Reputation

Always make sure you’re dealing with a reputable lender. Don’t go with a shady, off-the-wall loan provider just because you have bad credit. Instead, find a well-established and transparent company. 

If you don’t, some lenders will likely take advantage of your predicament. For example, they may try to charge unfair interest rates or offer you unreasonable repayment terms. 

So, stick to well-known loan providers if you don’t want to end up with the short end of the stick.

Why Do Payday Loans Have Fees and No Interest Rates? 

Many ask “What is the interest on a payday loan?”. Payday loans don’t have an interest rate because they’re usually repaid in a year or less. They’re meant to be repaid by your next payday, hence the name. 

In fact, most lenders calculate their rates annually, and such calculations can’t apply to such a short-term loan. 

As such, the governments set down strict regulations for payday lenders, only allowing them to charge set fees. That way, the borrowers aren’t taken advantage of, and the lenders get their due worth. 

How Much Should a Payday Loan Cost in Australia?

It doesn’t matter whether you are looking for payday loans in QLD or payday loans in Sydney. According to the regulations of the ASIC, here’s how much a payday loan would cost in Australia.

For a $1000 payday loan that’s to be repaid in 2 months, you’ll end up paying:

• Establishment fee: $200
• Monthly fees: $80 ($40 x2)
• Total: $1,280.00
• Payment on a fortnightly basis: $256 (x5)

Occasionally, you may come across lenders giving out $5000 payday loans. In such a case, they’ll start charging you an interest, which is generally capped at 48% p.a. of the principal. 

They’ll also charge you an establishment fee, typically around $400, though some may offer less. 

Eligibility Criteria of a Payday Loan

 Most money lenders in Australia will give you a payday loan provided that you:

• Are a citizen or permanent resident of Australia
• Are at least 18 years of age
• Have had a steady job for the past 3-months
• Have an active bank account, email and phone number

How to Apply for a Payday Loan

The first thing you should do before applying for a payday loan is to compare the available payday loans. Look for the lowest payday loans you can find, but make sure they’re offered by a reputable lender. That way, you don’t get hoodwinked, and you can save as much money as possible. 

Once you settle on a lender, all you need to do is fill out an online application. Here, you’ll state your personal information and how much money you’d like to borrow. 

The lender will then review your application and call you to confirm your details and get more information. If all is to their liking, they’ll send you the loan contract to sign. Once that’s done, they’ll send the money to your bank account.

Information and Documents Needed for a Payday Loan Application

Most loan applications require you to share the following:

• A copy of your ID
• Certain personal details, such as your email, address, and phone number
• Employment details 
• Proof of income (payslip or income statement)
• 90-day history of your bank transactions

Pros and Cons of Payday Loans

There are pros and cons of payday loans. Here are the most important ones. 

Pros 

• Payday loans are easy to get, only having minimal requirements.
• Almost everyone can get approved for payday loans, even people with bad credit.
• They have no interest rates. 
• Loan terms are relatively flexible.
• You can borrow multiple payday loans at once, provided you pay each one in full and on time. 

Cons 

• Loan amounts are limited.
• Your credit score may be damaged if you don’t make the loan payments on time.

Can You Take Out a Payday Loan If You’re on Centrelink?

Yes, though it’ll take you a few tries until you find a lender willing to work with you. 

You see, some payday lenders don’t consider Centrelink payments as a sufficient source of income, especially if Centrelink payments make up more than half of your total earnings. 

Nevertheless, a few lenders think differently. They believe that Centrelink payments are sufficient for a payday loan, given that payday loans are generally less than $2000.

So, if you don’t immediately find a lender willing to accept Centrelink recipients, don’t despair. You just need to look a bit harder.

Can You Get a Payday Loan If You Have Bad Credit?

Surprisingly, yes. However, it takes a few trials and errors. 

As you already know, most, if not all, lenders run a credit check on all their clients. Based on your credit history, they then decide whether it’s okay to lend you the money.

However, that’s not always the case with payday loans. 

Since the loans are relatively small, some lenders will move past your poor credit history and focus instead on your current financial situation. If they find your recent income and expenses suitable for a loan, they’ll give it to you without hesitation. 

Conclusion

It’s essential to compare payday loans before choosing a loan provider. Since each lender sets their respective fees and loan terms, you can easily end up paying more than you bargained for if you don’t pay attention. 

So, review your loan conditions thoroughly before signing the contract. Check if the establishment and monthly fees are within the legal range. Also, pay extra attention to the default fees and early repayment fees. If everything is in order, don’t hesitate to get that loan.