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Payday loans

Need to borrow money fast? A payday loan isn't the cheapest option

Page reading time: 4 minutes

A payday loan, also called a small amount loan, lets you borrow up to $2,000. You have between 16 days and one year to pay it back.

While it might look like a quick fix, a payday loan has a lot of fees. For example, to pay back a $2,000 payday loan over one year, your total repayments will be about $3,360. That's $1,360 more than you borrowed.

There are cheaper ways to borrow money when you need it.

If you're getting a payday loan to pay off another loan, talk to a financial counsellor. It's free and confidential.

Cheaper ways to get money fast

If you need to get money fast, these options are cheaper than a payday loan.

No interest loan

You can borrow up to:

To be eligible, you must:

You only repay what you borrow. There is no interest or fees.

See no interest loans for how to get one.

Centrelink advance payment

You can apply for an advance payment through the Service Australia website.

Help paying your bills and fines

If you're struggling to pay your bills, don't get a payday loan. Talk to your service provider straight away. They can help you work out a payment plan to pay bills or fines.

The government and some community organisations offer rebates and vouchers that can help you pay utility or phone bills.

See problems paying your bills and fines to find out more.

If you're struggling to make ends meet, talk to a financial counsellor. They offer a free and confidential service to help you understand your options and deal with money issues.

National Debt Helpline — 1800 007 007

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.

Mob Strong Debt Helpline — 1800 808 488

Mob Strong Debt Helpline is a free legal advice service about money matters for Aboriginal and Torres Strait Islander peoples from anywhere in Australia.

The helpline is open from 9.30am to 4.30pm, Monday to Friday.

The cost of payday loans

Licensed lenders can't charge interest on payday loans, but they can charge a lot in fees. You will have to pay back a lot more than you borrowed.

Most payday lenders charge an establishment fee of 20% of the amount borrowed and a monthly fee of 4% of the amount borrowed. For a $2,000 loan, that's a $400 establishment fee and $80 for the monthly fee.

Your repayment for a payday loan must be no more than 10% of your after tax income over the repayment period. That is, no more than a $10 repayment for every $100 you earn.

Fees on payday loans

Under the law, there's a cap on most payday loan fees. If you're charged more than the maximum fee, get free legal advice on how to get your money back.

Payday lenders can charge you these fees:

Establishment fee

  • maximum fee is 20% of the amount borrowed

Monthly fee

  • maximum fee per month is 4% of the amount borrowed

Default fee

  • charged if you don't make a repayment by the contract due date — the maximum you can be charged if you default is double the amount you borrowed

Paying back your payday loan

If you can't keep up with repayments, visit the National Debt Helpline website for help on how to repay your payday loans.

By law, licensed payday lenders must lend responsibly. This means they can't give you a loan if they think you won't be able to repay it or it could cause you substantial hardship.

If you think the lender didn't lend responsibly, get free legal advice.

Woman standing with her arms crossed, smiling.

Alisha gets a no interest loan instead of a payday loan

Alisha's fridge stopped working and she needed a new one fast. She found one for $1,200, but her bank wouldn't give her a loan.

Alisha found a payday lender online who would give her the money in an hour. Before applying, she used Moneysmart's payday loan calculator to see how much the loan would cost her.

A payday loan of $1,200 would have a $240 establishment fee and a $48 monthly fee. If Alisha repaid the loan over one year, her repayments would add up to $2,016. That's an extra $816 just for fees.

One of Alisha's friends suggested a no interest loan. These loans have no interest or fees and can be used for essentials like fridges or furniture.

Alisha went to her local community centre, where a no interest loan adviser helped her to apply. That afternoon, she had a cheque for $1,200 to buy the fridge.

Now, Alisha only needs to repay $1,200. Compared to a payday loan, she saved $816. And she was still able to get the fridge the same day.