• Yes, you will need a bank account since it is not possible to apply for a payday loan without having one.

• Lenders are not allowed to offer loan amounts of $2,000 or lower that must be repaid in 15 days or less. The fees charged on small payday loans that are to be repaid between 16 days and 1 year are capped with a one-time establishment fee (not more than 20% of the loan amount), a monthly account keeping fee (not more than 4% of the loan amount), a government fee or charge, default fees or charges (this should not be more than 200% of the amount borrowed if you miss a payment or fail to pay back the loan), enforcement expenses (in instances of loan default, these are the costs incurred by the lender when going to court to recover the money you owe under your contract).

• You can borrow amounts as low as $50 with a maximum of $2,000 for small payday loans.

• Initial fees on payday loans are 20% of the loan amount and a monthly interest fee of 4% of the loan amount. This translates to an Annual Percentage Rate (APR) of 48% per annum for other personal loan types with more than one year of payment. For a $2,000 loan, the establishment fee is $400 and the monthly interest is $80.

• If you do not make repayments on time by the due date, you will normally be charged default penalties, which will be added to your debt. The number of default costs that could be incurred can be double the amount borrowed but not more than 200% of the total loan amount. If you’re about to default on a payday loan, make sure to reach out and explain your situation to be able to try and work out a new repayment schedule plan.

• While this isn’t exclusive to payday loans, paying your bills on time might help improve your credit score. Settling your payments within the agreed-upon period demonstrates good credit behaviour. However, If you apply for multiple payday loans in a short period of time, your credit score may suffer. You can learn more about your credit score by reading our published articles:

5 Factors that May Affect your Credit Rating

What Is a Good Credit Score?

How Can I Improve My Credit Score?

• Payday loan defaults typically stay on your file for up to 7 years. Your service provider may notify a credit reporting agency about your failure to make a repayment, resulting in a bad credit rating. If you pay the debt, the default will still be present on your credit report, but it will also indicate that you paid it.

• To check if you are dealing with a legitimate lender, you need to verify if the lender is holding an Australian Credit License (ACL), and the lender should display this license number on their website.

Obtain a No-Interest Loan – The No Interest Loan Scheme (NILS) gives low-income people and families access to secure, fair, and affordable financing for household products, medical, and dental care. Call 136457 or visit www.nils.com.au for more information.

Credit Union Loans – Credit unions look at your credit score, but they also look at your relationship with the credit union and your income before approving a loan.

Emergency Relief – Although access to Emergency Relief is free, certain service providers may have specific requirements that must be completed in order to use their specific Emergency Relief program. The Department of Social Services (DSS) Service Directory lists your local Emergency Relief provider.

Centrelink Advance Payment – If you are currently receiving Centrelink payments and other similar government benefits, you may qualify for the advance payment benefit free of interest or fees. You can send your application through the Service Australia website.

Credit Cards – Credit cards are an excellent financial alternative to payday loans if you need to cover any unexpected bills during a difficult time. The advantage of using credit cards is that it provides the user with an open line of credit. Users will not be compelled to submit applications every time they need to take out extra cash.

Overdrafts – If you need to cover for an immediate financial need, you may rely on overdrafts on your current loan accounts. This will help you conveniently address financial gaps without having to apply for another loan. Once you pay it off, it will still be available for you as an additional means to address future emergency expenditures.