You may be considering a quick cash loan to help you make ends meet or to pay for unexpected costs. These types of loans may solve your short-term money issues, but they often lead to long-term money problems. There are cheaper options available.
Types of cash loans
Cash loans include pawn shop loans, payday loans and pay advance services. The amount you borrow can be paid directly into your bank account, or you may be given the cash directly.
You will usually repay one of these loans by:
- A direct debit from your bank account, or
- A deduction from your pay
Different kinds of cash loans have different rules about how much you can borrow, when you have to pay it back, and what fees and charges can be included.
Questions to ask before taking out a cash loan
Cash loans can turn out to be more expensive than you thought. Make sure you're aware of how much you could end up paying back. Before signing up ask the lender:
- What fees and charges will in need to pay, and when will I need to pay them?
- What is the interest rate and how does it work?
- What will happen if I don't pay the loan back on time?
Pawn shop loans
To get a pawn shop loan, you bring in an item to use as security for the money you borrow. The pawn broker will decide what they think the item is worth, and then offer you a loan based on that value.
Pawn shop loans usually also include charges such as interest and if you don’t pay back what you owe, the pawn broker may sell your item.
States and territories have different rules about pawn shop loans and how long you have to pay them back. This is usually between one and three months. In some places you can ask to extend the loan for longer.
A payday loan is a high-cost, short-term loan that must be repaid between 16 days and 1 year.
Lenders are not allowed to charge you interest on a payday loan, but they can charge you fees. Payday loans typically have fees like an establishment fee, monthly fees and late fees if you don’t pay on time. This means you’ll pay back a lot more than you borrowed even if you don’t pay interest.
Before a lender gives you a payday loan, they will ask to see proof of income, such as bank statements, as well as other documents to help them check your financial situation.
A lender is not allowed to give you a loan if they think you won’t be able to pay it back without difficulty.
Find out how payday loans work and the fees lenders can charge you.
A pay advance service lets you borrow money before your next payday. There’s usually a limit on what you can borrow, but it could be as much as a quarter of your pay.
Repayments are automatically deducted from your next pay. Or you may be able to spread repayments across several paydays.
You don’t pay interest on the money you’ve borrowed, but like a payday loan there are fees each time you use the service.
A pay advance may be an easy fix when you need money quickly, but it also means you’ll have less money on your next pay day. This can make it difficult for you to manage your other financial commitments like bills and groceries.
See pay advance services for things to check before you sign up.
Cheaper alternatives to cash loans
If you need money, you may have other options than an expensive cash loan.
No interest loans
No interest loans can be used to pay for essential items like a fridge, washing machine or car repairs. Or to pay for a service like medical or dental treatment.
This type of loan has no fees and no interest, so you only repay what you borrow. Repayments are spread over 12 or 18 months for most loans.
No interest loans are not cash loans. Instead, you will be given a cheque addressed to the supplier of the goods or services you are buying.
Find out how to apply for a no interest loan.
If you get a payment from Centrelink you may be able to get an advance on your payments. You will have to pay this money back to Centrelink through deductions from your fortnightly payments, but there will be no interest charges.
The Service Australia website has more information about applying for an advance payment.
Build up your savings
If you can, saving some of your money can help you avoid using high-cost loans in the future. A savings plan can help you get ahead and be ready for future purchases, and an emergency fund can help you cover unexpected costs.
Get help with money decisions
If you’d like help with money, there are people you can speak to for free. If you're having trouble with debts or bills, speak with someone as soon as possible. There’s no shame in getting help.
Mob Strong Debt Help is a free advice service about money matters for Aboriginal and Torres Strait Islander peoples from anywhere in Australia. A financial counsellor at Mob Strong Debt Help can provide advice and help you understand your options.
The helpline is open from 9.30am to 4.30pm, Monday to Friday. Call 1800 808 488.
The free National Debt Helpline is open from 9.30am to 4.30pm, Monday to Friday. When you call, you'll be transferred to a financial counselling service in your state. Call 1800 007 007.
Experiencing financial stress or money worries can impact your mental health. If you’re concerned about your mental wellbeing, help is available.
13 YARN is a national support line for Aboriginal and Torres Strait Islander people that provides free, culturally safe support for people having difficulty coping.
Contact 13 YARN on 13 92 76 for free from any phone in Australia, 24 hours a day.
You can also contact Beyond Blue on 1300 22 46 36 (24 hours a day). Or use Beyond Blue’s web chat (24 hours a day).
ASIC’s Indigenous Outreach Program
The Indigenous Outreach Program (IOP) is an established and specialist team working across ASIC to provide advice, insights and support to ensure ASIC’s engagement with Aboriginal and Torres Strait Islander peoples is culturally appropriate and sensitive.
The team also works with industry, service providers and other government agencies to influence system change and drive positive financial outcomes for Aboriginal and Torres Strait Islander peoples.
You can contact the team through ASIC's Indigenous Help Line on 1300 365 957 (cost of a local call from landlines and more from mobiles). You can also email the team at [email protected].