Payday Loans: What Is It All About and How to Apply for One?

Payday loans are becoming popular in Australia. This is due to the fact that many people are struggling financially and need help with paying their bills immediately. Payday loans can be a good way to get quick cash when you need it. 

So, if you’re looking to get one for yourself, you must first understand what payday loans are. We’re here to help you unravel everything there’s to know about them.

What this article covers:

What Is a Payday Loan?

If you Google “payday loans definition,” you’d find that they’re a type of high-interest loan that you get from a lender promising to pay them back on your next payday. You can apply for one through an online lender or at a store near you. Once you’ve applied for the loan, the payday lender will assess your application and determine whether or not you’re eligible for it. 

payday loans what is

What Are Payday Lenders?

They’re basically the ones who lend you a payday loan. 

Pros of Payday Loans

Let’s see the advantages of payday loans:

  • Easily Accessible: There are many payday lenders nowadays, and unlike other types of loans, you can get a loan online 100%. So you don’t always need to go to a physical office to sign documents unless they tell you to do so. You may be eligible to get multiple payday loans at once as well.
  • Fewer Documents: Most lenders will only require 2-4 documents for you to apply for a payday loan. They’re your basic identification documents plus proof of income.
  • No Collateral: A payday loan is an unsecured loan, which means that it doesn’t need any sort of collateral. So, you don’t need to attach your car’s documents at all just to apply for one. 

Cons of Payday Loans

Now, let’s have a look at the drawbacks of payday loans:

  • Big Fees and Interest Rates: Out of all the loans you probably know, payday loans are among the most notoriously expensive. Before ASIC regulated them, they could have an interest rate on payday loans of almost half of the total loan amount for a short term. 
  • Debt Cycles: Since payday loans have big fees and interest rates, some borrowers will try to extend their term, which just adds up other fees. They sometimes get another payday loan to pay their current one, which only doubles the fees they need to pay. 
  • Predatory Lenders: Many payday loan organisations prey on easy Australians, and ASIC has targeted a few of them already. 

what is a payday loan

How to Know if You’re Eligible for Payday Loans

Before you apply for a payday loan, you have to make sure you’re eligible. Most lenders will see if you:

  • Are you an 18-year-old Australian on the day of your application 
  • Have a permanent address
  • Have a 100-point of identification
  • Have a bank account 

Some payday lenders might have other eligibility criteria, so always ensure that you read their websites to know more. 

Requirements for Payday Loans: What Are They?

Most lenders will usually ask for the following:

  • Contact Details
  • Proof of Income
  • Identification Documents
  • Bank Account

Again, just like with the eligibility criteria, the lenders’ requirements will vary as well. They might ask for additional requirements.

what are payday lenders

How to Apply for a Payday Loan

The application process for payday loans is as easy as it gets. Here’s how to apply for one:

Find a Lender

You’ll need to find a lender that offers payday loans in the area you live. But luckily, you can seek one online without minding where you live in Australia. Just remember to seek the best payday loan available.

Fill Out an Application

Once you’ve found a lender, go to their website and fill out their application form. You’ll have to provide personal information like your name and address. You’ll also need to answer some questions about your income and expenses.

Wait for a Reply

After submitting your application online, the lender will review it and send you an email within 24 hours, or sometimes much sooner. 

The email will include instructions on how much money they’re willing to lend you and what repayment terms are required (like how many days before paying back the loan). 

what is a payday lender

Any fees involved with this loan—such as an application fee or late payment fee—will also be included.

Most often, this information will be readily available on their website before you even complete your registration. There will be a toggle switch that you can manipulate to enter how much you’d like to borrow, and it’ll show you the fees and interest rates. 

Tip: You should always compare payday loans to know which one suits your needs the best.

Receive the Loan

Once you receive a confirmation for loan approval either via email or sms, all that’s left is waiting for your loan to get disbursed. Make sure you’ve provided the right bank account to avoid any discrepancies.

Types of Payday Loans

Payday loans can come in different forms. Here are some of them:

Cash Advances

This is most often used by people who need to pay off their credit cards or other debts but don’t have enough money on hand at the moment. You can borrow up to $1,000 with a cash advance, which is typically repaid within two weeks.

Instalment Loans

Instalment loans are similar to cash advances in that you can borrow up to $1,000 (or more); however, instalment loans are paid back over time via monthly payments instead of all at once.

This means that you’ll be able to make more consistent payments over time, even if it takes longer for you to pay everything back. This can help you avoid getting into debt trouble again!

what is payday lending

Revolving Credit

Credit card balance transfers let you transfer balances from one credit card onto another one that offers lower interest rates and lower APRs (annual percentage rates). 

There are many credit unions that have applications for revolving credit already. You can easily convert and transfer your credit line directly to your savings or checking account. 

Conclusion

Before you apply for a payday loan, make sure you know what you’re dealing with. Ask yourself questions like, “What is the interest on a payday loan?” Know its rates and compare different ones. This will help you choose the best one suited for your needs. You surely don’t want to get trapped in debt. 

Also, make sure to seek a trusted lender and understand their terms. If you want to be sure that you’re dealing with a legitimate lender, you can rely on loan finders, such as Orange Loans, to do the finding for you.

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