Australia is home to a number of payday lenders providing quick, loans repaid before your payday or spread over the year for amounts under $2,000 (although some lenders offer as much as $5,000 as payday loans). Many payday lenders operate online, although some of them also have a physical branch network that customers can use to apply for a loan.
The payday loan application process is deliberately kept short, taking about 10 minutes, on average, to complete. The approval process is also expedited to ensure funds are delivered as quickly as possible to the borrower. However, payday loans come with excessive charges and fees, mostly because payday lenders have lenient eligibility criteria.
What Is A Payday Loan?
A payday loan is called as such because the repayment installment dates are set according to the borrower’s payday until the entire loan amount has been repaid. These installments can be weekly, fortnightly, or monthly, depending upon the frequency of the borrower’s pay and can span across a loan term of up to a year.
Comparing Payday Loans
Before applying for a payday loan, borrowers must consider the following factors to evaluate whether a payday loan meets their needs.
- Amount Limits
It is important to know that most payday loans would allow borrowers to take out amounts of up to $2,000, while only a few have higher limits. Also, rates and charges applied on a loan are directly proportional to the amount borrowed, so borrowers should only as much as is absolutely necessary.
- Term Structure
Payday loans can be taken out for as short as 16 days to as long as 1 year. However, a longer loan term would increase the fees and charges that the borrower has to bear on a loan. Even if a lender allows a longer loan term, it might not be the most suitable option for you.
- Repayments Timeline
Repayments are aligned with the borrower’s payday so that the borrower is always able to afford the due payment. However, borrowers must make sure that they would be able to cover the rest of their expenses after making due loan repayments, and set their repayment timeline accordingly.
- Associated Fees
In Australia, lenders providing loans of amounts under $2,000 are limited to charging a maximum of 20% as a one-time establishment fee and 4% as a monthly fee. However, they can still charge additional fees in case borrowers fail to meet all loan conditions, such as making due payments on time or repaying the entirety of the loan obligation.
- The Reputation of the Lender
Reputable payday lenders are those that care for the financial well-being of their customers, in addition to providing a secure and reliable credit service. A few measures that borrowers can take to ensure their chosen lender is a reputable one are:
- Checking whether the lender holds a credit license
- What past customers have to say about the lender at online review forums
- Testing the customer service offered by the lender by calling them and asking a few pertinent questions about the services being offered by the lender. Good customer service would respond promptly, be courteous, and offer transparent information.
- Turnaround time
Every lender has a different turnaround time, with some processing loan funds after approval in less than 30 minutes, while others taking as long as an entire business day. Lenders usually define the cut-off time before which applications must be submitted/approved if borrowers want the funds to be released the soonest.
Applying For A Payday Loan
Most payday lenders have an online application form these days, so applying for a payday loan has become very easy. For the non-tech savvy, many lenders offer physical branches where the helpful staff is happy to guide people through the payday loan application form.
It is always wise to check the lender’s eligibility criteria and lending terms before filing an application, as this can save you from applying with a lender that is most likely to reject your application. Also, you should gather all the required documents beforehand to make sure the loan application process is smooth.
Payday loans usually have limited eligibility criteria that mostly focuses on the regular income being generated by the borrower. The following criteria must be met, in the case of most payday lenders, to qualify for a payday loan:
- Adequate eligible income
A core condition set by all payday lenders is that loan applicants must be generating a stable regular income to qualify for a payday loan. Also, for the income to qualify, more than 50% of it must come from sources other than Centrelink or any other government benefits received by the borrower.
- Sufficient credit history
Most payday lenders would accept loan applications from borrowers with a bad credit score, as long as they are able to prove affordability with their regular income and meet the other eligibility criteria.
- Residential status
Applicants must be Australian PR holders or Citizens.
- Appropriate age
Applicants must be over the age of 18 to apply.
Required Documents And Information
Payday loans, due to their small amount, do not carry a lot of risk for the lenders, hence not a lot of documentation is required to apply. However, lenders still need the following documentation and information to be submitted:
- Personal information including full name, date of birth, proof of residential address, and valid contact information. New customers may also be required to submit proof of identification.
- Income information including proof of employment, income statements for the recent months, and contact information of the employer. Some lenders might contact employers just to verify the employer, without revealing that the applicant has applied for a loan.
- Financial information including bank statements, credit history including existing loan obligations, and details pertaining to regular expenses. This information is important to evaluate the affordability of the borrower for the loan amount being requested.
For payday lenders, it is not important whether borrowers have a great credit history or a good asset position. What matters most is the affordability of the borrower to make timely repayments.