What are Payday Loans?

Payday loans are small amounts of money loaned to borrowers at very high interest rates and fees. They were originally designed so that borrowers could pay back the loan after they received their next wages or Centrelink payment.

In Australia, payday loans are sometimes referred to as Small Amount Credit Contracts, or SACCs. A loan will be a SACC where it is:

Provided by a non-authorised deposit taking institution (Ie: not a bank); and
For less than $2,000; and
For a term between 16 days and 1 year.

These loans may look appealing as they give people access to money quickly and borrowers can generally apply online, with few documents required.

If you are considering taking out a payday loan, it is important to be aware of the risks (see below). For more information on Pay Day Loans or to use the Pay Day Loan Calculator, visit Moneysmart.

By law, licensed payday lenders must lend responsibly. This means they can’t give you a loan if they think you won’t be able to repay it or if it could cause you substantial hardship. If you think the lender didn’t lend responsibly, please contact us for free legal advice using the form below.

What should you be aware of?

The amount of fees that can be charged are limited by the law, but can still be extremely high. Payday lenders are allowed to charge up to 20% of the amount borrowed as an “establishment fee” and a “monthly fee” of 4% of the amount borrowed. These high rates can cause debt spirals if you are unable to get on top of your repayments.

Over 12 months:

If you borrow $250, you could end up repaying $420.
If you borrow $500, you could end up repaying $840.
If you borrow $1,000, you could end up repaying $1,680.

Even though payday lenders must provide a warning about the risks of the loan either on their website or in their shop front, they are not required to display their fees as an annual interest rate.

Information on our website is provided for information only and is not legal advice. If you would like legal advice, please message us using the form below for a confidential discussion, or scroll down to see other ways to reach us.

What to do if you fall behind on your payday loan repayments?

If you are unable to make a repayment to your payday loan, contact your lender and discuss a hardship arrangement. You can also discuss your options with a Financial Counsellor or contact us regarding your rights.

If you would like more information, please message us using the form below for a confidential discussion or scroll down to see other ways to reach us.