Have you ever found yourself in need of a payday loan or urgent cash but you don’t have a clue where the money will come from? Have you ever tried borrowing from friends or extending your credit limit but nothing works? The good news is that you can apply for a payday loan. This is an instant loan that guarantees money in your bank account within 24 hours. This sounds too good to be true but the fact is, payday loans can actually help you sort out emergencies and other cash needs fast and easily.
Who Can Apply for a Payday Loan?
Almost every Australian citizen or those who are in the country legally can qualify for a payday loan. Payday loans are ideal even for those with a bad credit history. Lenders are usually not interested in your past credit experience but your current ability to pay up money that has been granted including the interest charged.
Here are some of the things you might be required when making an application:
- An identification document – This can be your driver’s license, voter’s card, passport, or any other similar document.
- A source of income such as a job – There are those who receive regular benefits who can also qualify for a payday loan.
- Be over 18 years old.
- Have a Medicare card and number.
- Proof of residency – This can be a utility bill, a rental agreement, or a house certificate.
- A bank statement dated within the past 3 months.
Most banks might not qualify those with a bad credit history. In fact, this is a major factor for anyone who wants to apply for a bank loan. This might limit some who may not have this qualification, however, payday lenders are a welcoming option for them.
Features of a Payday Loan
Easy Application Process: Unlike banks and other lending institutions, you do not have to fill in and submit many documents. This makes the process faster. The application process for a cash loan can take a few minutes and is made completely online.
Fast Loan Approval: Once you submit the required documents, you do not have to wait for long before knowing whether the loan has been approved or not. It takes less than an hour to know the loan approval status. Banks can take days and sometimes weeks before approving a loan.
Fast Cash Disbursement: Once the application has been approved, you will be required to reauthorize the process. After this, the money will be transferred to your bank account electronically. This means that within an hour, you can apply for the loan and have the money in your account.
No Credit History Checks: Your credit history will not determine whether the loan application gets approved. Payday loans are suitable for those with a bad credit history.
No Collateral Required: You do not have to give a security for a loan.
Short Term Loan: Payday loans are required to be paid within 30 days.
The maximum amount of money that you can apply for is $2000. Payday loans are not ideal for those who want to borrow higher amounts.
Why are Payday Lenders able to Offer Same Day Services?
When you apply for a loan in a bank, it might take days or weeks before it is approved. The process is tedious and cumbersome. There is a lot of paperwork to go through and you must also provide collateral. If you have a bad credit history, you do not stand a chance of getting the loan approved. Payday lenders, on the other hand, do not take this into consideration.
Because the requirements are few, they are able to process the loan faster. Why don’t they ask for collateral? This is because the loan repayment period is quite short. This ranges between 14 and 30 days. In addition to this, the amount borrowed including the interest charged should automatically be deducted from your paycheck on your next payday.
Isn’t lending to people without collateral risky? Yes, it is but to cover for the high risk involved, payday lenders charge higher interest rates than banks and other lending institutions.
When Can You Apply for a Payday Loan?
There are many instances when applying for a payday loan can be the best solution, here are some of them:
- Medical Emergencies: We all know this is something that cannot be put off until you get the required amount of money. When you or a loved one falls sick and you have no money to take care of the expenses, a payday loan can be a fast option. You can borrow anything from $200 to $2000 and, it is possible to get the cash within an hour after making the application.
- To Buy Groceries: Have you run out of groceries and your payday is days or weeks away? A payday loan can help you take care of this. You can apply for the loan and buy whatever you need to help you get through until your next paycheck.
- For Repairs: An important home appliance or machine can break down. What do you do? Your car may require some maintenance work. Do you wait until your next paycheck arrives? Some things cannot wait to be sorted therefore the need for a quick source of cash.
- To Take Advantage of Offers and Discounts: Some offers on goods can be too good to just let go. When you do not have cash, you may opt to let the chance pass you by or you can apply for a payday loan for quick cash. You might end up saving more money this way.
- Get Cash to Take You Through: Payday may seem a long way off especially when you do not have money to cater for daily expenses. A payday loan can help you get through the days or weeks before you finally get your paycheck.
Is Payday Lending Legal?
Payday loans seem like a dream come true for many who cannot access loans from banks and other financial institutions. The fast process makes things even better. This might make some people wonder whether it is actually a legal business and if so, are there any rules that govern such operations.
Payday lenders are registered with the Australian Securities and Investment Commission (ASIC). There are set regulations they have to adhere to. Under the same body, you as a borrower are protected and the payday loan is recognized as a personal loan.
A lender cannot harass or make you uncomfortable in any way. ASIC rules declare that a lender cannot keep on communicating with a borrower through phone calls or other means even when there is a default. Proper channels should be followed which include seeking legal action from a court of law when all other reconciliation efforts fail.
How much do Payday Loans Cost?
- There is a base fee or an establishment fee of 20% charged, which is a one-off fee. This excludes the interest rate which at the moment is 4%.
- Payday lenders cannot hike the interest they charge. This amount is determined by the Australian Securities and Investment Commission and is reviewed from time to time. At the moment, this amount should not exceed 24%.
What are the Advantages of Payday Loans?
Other than the fact that you can get fast cash, what are the other positive aspects of payday lending?
- Convenient – You do not have to visit a lender’s office or make endless phone calls. Just contact a lender online and fill in the required details in the application form. All the other documents are also sent electronically. You can go through the whole process from the comfort of your home or office. This also makes the application process fast.
- Lower Amounts Can Be Granted – Many banks cannot agree to loan amounts lower than $2000. Payday lenders can grant amounts as low as $200.
- Payday Loans No Credit Check – Even when other institutions do not approve those with a bad credit history, payday lenders can lend you the amount you want regardless of your credit history status.
- When you pay the loan smoothly, this may improve your credit score.
- No Need for a Collateral – This makes it easy for anyone, regardless of the financial status, and as long as they have a consistent source of income, to access a payday loan effortlessly.
The Downsides of Payday Loans
- High-interest rate charged – This is unlike other lenders such as banks. Due to the risk involved for lenders, loans may end up with high interest rates. This should be taken into consideration before acquiring a payday loan.
- Short Repayment Period – Most lenders will only give you a maximum of 30 days to pay up all the money including the interest accrued. This can be an uphill task especially if you had not carefully considered how you will pay back the loan.
- Small Amounts to Borrow – The maximum amount you can borrow is $2000. This can be restricting if you want larger amounts of money. You may have to consider other options such as banks when borrowing larger amounts, or other online lenders.
- A payday loan can taint your credit score when you default.
Which Payday Lenders Can You Trust?
Payday lending is a thriving business in Australia. For the past 5 years, over $ 400 million has been transacted in this industry. With this being the case, it is a legal, regulated, and growing market. Nonetheless, diligence should be exercised when borrowing from a payday lender. Ensure that they are fully registered and recognized by the Australian Securities and Investment Commission (ASIC). If you check at the bottom of their website, there should be a Credit Registration Number for the Australian Credit License.
In addition to this, check online reviews.
There are Many Payday Lenders but What Makes One Stand Out?
All top payday lenders in Australia have the following in common:
Transparent Operations: There are no hidden charges or fees. You get to know everything from how much will be disbursed to you and the interest charged. If you require clarification on any issue, this should be accorded to you as well.
Your Information is safe: You do not have to worry about your details being shared with third parties. All your information is safe where secure servers and top of the range technology ensures that no unauthorized persons can access your details.
They are authentic, fair and registered companies that have a good reputation to uphold.
Other Things You Should Know Concerning Payday Loans
Even if a lender may not base the loan approval on your credit score, they might still check your credit history. Note that they will have access to the details excluding your personal details. Why do they need this report?
- To make sure that you do not have another pending payday loan. According to the Australian Securities and Investment Commission, a person should only have one personal loan, in this case, a payday loan at a time.
- To check the frequency with which you borrow money.
Who Can Apply for a Payday Loan?
Because of the easy loan application terms, almost every adult Australian citizen can access the services. The most important thing is that you should have a source of income. Tourists, students, single parents, and those on benefits can also access the loans. Immigrants who are legally in the country can also apply for payday loans.
Centrelink beneficiaries can also borrow although they need to prove that they receive the benefits. Some lenders may insist on having another listed source of income. If you receive any form of benefits, you need to produce at least a six months statement to prove this before you get the loan approved.
Payday loans are easy ways of accessing fast cash and are fantastic for getting yourself out of a bad situation and as a quick resolution to an immediate monetary problem. However, when a payday loan is not handled well, you can end up getting into a debt cycle or living beyond your means. Always borrow when it is absolutely necessary.
Before accepting the offer, make sure you understand the lender’s terms including the interest rate and duration of time given to make a full loan payment. The high-interest rate charged and short loan repayment time can be strenuous if not well articulated. If you require any financial advice before applying for a loan, Financial Counselling Australia can be of assistance through its many free services.