Monday, September 26, 2022

Payday Loans- Scary or Safe?

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George Soto
George Soto
George Soto is a national journalist with nearly 15 years. While studying journalism at Chicago, George found a passion for finding currency stories. George mostly covers cryptocurrency, NFT, blockchain and other business related issues.

Life is expensive. With rent, utility bills, groceries, petrol and any other day to day costs its amazing that people are managing to stay afloat. So, its no surprise that businesses started to pop up to exploit this. We’ve all seen ads around the place for quick cash loans (also known as payday loans); the ones that claim you can apply online and get approved straight away. In the moment, it may seem like a good idea… but is it actually?


What is a payday loan? Well, it’s a small loan – generally between $100 to $2,000-  the length of the loan will usually range from 16 days to a year. The point of these loans is to tide you over until you next get paid, with the aim to repay the loan over as short a time as possible. As with any loan, the terms differ depending on how much you are trying to get and over what length of time you have opted to pay it off. The terms of payday loans often line up with your payment schedule, so if you get paid fortnightly your repayments would be on a fortnightly basis, and if you get paid monthly the repayment would be taken out of your account on a monthly basis.


What interest is charged? Everyone is told to watch out for quick cash loans because of the high interest rate, but here is a breakdown of how it actually works. What you may not know is that the Australian government has put regulations in place for payday loans. This is in the form of a fee cap; lenders are only able to charge certain fees. These are as follows:

  • A one off set up fee of 20% of the amount loaned
  • A monthly fee of 4% of the initial loan amount
  • Any relevant government charges
  • Fees if a payment is missed

As shown above, payday loan providers are only able to charge fees that are a percentage of the amount borrowed. These fees are capped at 24%, but remember it is charged over a short space of time, so it’s easy for this to accumulate.


What about my credit score? When you apply for a loan through a bank, they will always do a credit check, and if your credit score is bad, you will most likely be declined. Most quick cash loan providers are less strict about your credit score, so people with bad credit are often able to get a loan providing there is proof they can make the required payments. Instead, these types of lenders will focus on the income of the applicant and the financial activity over the past three months.


If you choose the right lender, payday loans don’t have to be as scary or as dodgy as they are made out to be. They can be a real life saver.

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