A small loan can be quick and easy, often you will get the money in your account the same day. It seems a simple solution, they don’t check your credit history and you can have more than one loan at a time.
Sometimes people think that a small loan is their only option, but there are many other options if you are in need of financial help. These loans aren’t as simple as they sound. Firstly, you need to remember that businesses make their money from these loans, so they will charge you high fees, interest and extra costs if you don’t pay on time. If you are in financial difficulty you can call Financial Counselling Australia for free advice.
These fees can often be higher than what you would pay with a bank and they expect you to pay them back very quickly. Businesses that give these loans are often called ‘payday lenders’ or ‘high-cost short-term lending’ they might also call themselves ‘smart loans’ or ‘quick loans’.
Often people get these loans in an emergency or instead of saving the money beforehand. Emergencies happen and everyone needs help, but the best way of staying out of debt is not taking out a loan.
A small loan is normally up to $2,000 that must be repaid between 16 days and 1 year. You will normally have to pay it back through a regular deduction from your bank account.
Legally these companies are allowed to charge you:
So if you are still considering this type of loan, make sure you check the numbers to make sure you are not being overcharged. If you aren’t confident, take someone you trust with you.
You will need to fill out an application and take in important documents like bank statements, bills, credit card statements and other documentation as requested. This will help them to determine if you can afford to pay back a loan.
Generally speaking, businesses that give cash loans do not check your credit history and are not always thorough in determining whether you can make the repayments.
That’s why it is important you know how much you can afford, and exactly what they are asking you to pay. To find out more about budgeting, click here.
You will normally need to pay an establishment fee at the beginning of the loan, monthly account keeping fees plus interest. This all paid is on top of the amount that you borrow.
All these fees mean that it is extremely important to read all the information and the contract before you receive the loan so you know exactly what you are going to be paying and if you can afford it.
If you are in financial difficulty you can call Financial Counselling Australia for free advice.