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Payday loan

Information about low-value, short-term cashflow loans

A payday loan is a small, short-term loan (typically no more than $500) which is often provided without a credit check within 24 hours of application.

The Consumer Credit Code regulates pay-day loans that:

  • are more than $50; and
  • last for a period no longer than 62 days; and
  • incur fees and charges (including application and any late fees) which are greater than 5% of the amount of credit; or
  • involve an annual interest rate of more than 24%.

Before you consider committing to a payday loan, contact a Financial Counsellor who may be able to provide you with alternatives and give you useful advice.

Before you sign up

  • If you are unsure whether you will be able to repay the money within a reasonable period of time, if at all, do not apply for the loan.
  • Be familiar with all the terms and conditions of the payday loan such as maximum loan term and accepted methods of repayment.
  • Check that your payday lender is licensed as a credit provider.
  • Since payday loans tend to be much more expensive than other types of credit consider all your alternatives. Possible alternatives include:
    • arranging a repayment plan with your existing lender;
    • using your credit card instead;
    • requesting a pay advance from your employer;
    • using your bank account's overdraft facility;
    • drawing on your savings;
    • obtaining funds from a relative; and
    • applying for a personal loan from a financial institution.

Be sensible

  • Only use payday loans for emergencies or unexpected expenses which you otherwise could not afford.
  • Avoid dependence on pay-day loans by storing 'rainy day' funds in a savings account.

After you receive the money

  • Steer clear of paying excessive amounts in interest and late fees by repaying your loan as quickly as you can, preferably before the due date.
  • As soon as you get paid, make repayment of the loan your first priority.
  • If you find that you need more money, borrow in small increments and only what is necessary.

For more information, see the Short term lending and cash advance brochure.