Payday or Cash Loans

Small loans

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.

How do these loans work?

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:

  • A one-off establishment fee of 20% of the amount loaned
  • A monthly account keeping fee of 4% of the amount loaned
  • A government fee or charge
  • Default fees (if you don’t make your payments) of up to 200% (twice the amount loaned)
  • Enforcement expenses (if you fail to pay back the loan, these are the costs of the credit provider going to court to recover the money you owe them)

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.

How do you apply?

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.

Positives and negatives


  • They have a quick turn around and are relatively easy to get.


  • If the payments are being direct debited from your account that means you always have to make sure you have money in your account.  If not, you will get an overdrawn fee from your bank which can be around $10 depending on the bank. This is a charge for arranging a payment with someone and then not having the money in your account to cover it.
  • When you are figuring out how much the regular repayments will be, make sure you take into account the set up fees and any other additional costs as they will also be deducted from your account. If you can’t afford the regular payments the lender will charge you more fees.

If you are in financial difficulty you can call Financial Counselling Australia for free advice.