Financial difficulties: is a payday loan your only option?

Payday loans can seem like the easy way out.

Payday loan debt on notebook beside piggy bank and calculator

If you watch commercial television, you can’t fail to have noticed the increase in advertisements for payday (or cash) loans. Although they’re usually aimed at a younger audience, as witnessed by their ‘wacky’ content, the reality is that to someone in a precarious financial position, they can seem like the easy way out. The reality is very different; due to the high fees charged, they can often make money problems much more serious.

According to, a $1500 payday loan taken over 25 days, will cost you $360 in fees, with two fortnightly repayments of $930. This is based on a 20 per cent establishment fee and a monthly account-keeping fee of four per cent, the maximum a payday lender can charge. Credit providers are not allowed to charge interest on this type of loan.

Payday loans can be taken out for amounts up to $2000 and are usually paid back over a short period of time, although the duration can be anywhere between 16 days and one year. As the name suggests, repayments are usually taken on the day that you are paid, either as a direct debit from your bank account or directly from your salary.

Payday lenders are bound by the same credit-lending criteria as other financial institutions and should never offer a loan to someone who is clearly having issues paying back their debts.

Default fees can quickly add up, too, although from 1 July 2013, the most you can be charged if you default on a loan is twice the actual loan amount. This is inclusive of any repayments paid under the contract. Before signing any contract, it’s important to ask what fees you are liable to pay should you default on your loan or are late with a payment.

It’s also worth noting that there are alternatives to payday loans.

If you’re struggling to pay a bill, such as a utility bill, you should contact your provider and ask about payment plans. 

If you’re looking to replace a household items, such as a fridge or washing machine, or need to pay a personal services bill, such as a medical bill, then you may be eligible for a no-interest loan if you’re on a low income. 

For those who receive a benefit from Centrelink, you may be able to get an advance payment, which has no interest charged and involves regular amounts being deducted from your fortnightly payment.


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    28th Oct 2016
    NILS is a very effective way of accessing money up to $1200. There is also another loan available called StepUp, which is also available for low-income earners, also through GoodShepherd Microfinance. Up to $3000 can be borrowed and repayable over three years at a low interest rate of 5.99%. Ie if $3000 is borrowed, it would be repayable at less than $42.00 per fortnight and over the three years the total interest paid would be $240.00.
    30th Oct 2016
    what a total rip off Sally. PPL in dire straights can hardly afford to take out such loans and they wonder why ppl get themselves into such hardships cause they haven't a clue what they are up against. This should not be allow.
    Such a percentage to pay back, would kill some ppls budget.
    Yet the Politicians of today WASTE our money hand over fist, and they don't give a damn either.
    They go on Education tours so they call them. They don't need to go on all those, and they go in luxury, while many in Australia struggle to house themself. They should be so ashamed of themselves??
    Not Senile Yet!
    28th Oct 2016
    This is a direct copy of American Policy/Loan is Wrong to allow them to charge such high fees as well as high interest once in default.
    A classic case of not my problem.....the buyer/purchaser should be aware!
    No....this is Legalicing Con artists to take advantage of the ignorant!
    Strict Restrictions need to be put in place to protect the nieve/ignorant fom such trickery using fine print that is unreadable!
    30th Oct 2016
    Yes NSY, they should be banned from being allowed to do that in Australia, but what do the Politicans care!!
    While they are willy nilly waste the dollars in their care.
    We have to struggle on :(