Payday Loans in Australia: What You Need to Know
A payday loan is a small loan of up to $2,000, repaid over 16 days to 12 months. In Australia they're legally called small amount credit contracts. Lenders can't charge interest on them, but they can charge an establishment fee of up to 20% and a monthly fee of up to 4% of the amount borrowed. That makes them one of the most expensive ways to borrow.
Here's how the rules work, what a payday loan really costs, and the cheaper options worth checking first.
What is a payday loan?
The name comes from loans that were paid back in one lump sum on your next payday. Australian law has changed a lot since then. Loans of $2,000 or less now have to run for at least 16 days, the fees are capped, and repayments are limited to a share of your income.
Today, many lenders offer small loans repaid in regular instalments over several months instead of one lump sum.
The rules for payday loans in Australia
- Loan amount: Up to $2,000
- Loan term: 16 days to 1 year
- Establishment fee: Up to 20% of the amount borrowed, charged once
- Monthly fee: Up to 4% of the amount borrowed, each month
- Interest: Not allowed
- Default fees: Total default charges are capped at double the amount borrowed
- Repayment limit: Repayments can't be more than 10% of your after-tax income over the loan
- Lender checks: Lenders must check the loan suits you and that you can repay it without substantial hardship
Source: ASIC's Moneysmart.
How much does a payday loan cost?
Because the monthly fee is charged on the original amount, the longer the loan runs, the more it costs.
- $500 over 3 months: $100 establishment fee (20%) plus $60 in monthly fees (4% a month), so $660 repaid in total.
- $1,000 over 6 months: $200 establishment fee plus $240 in monthly fees, so $1,440 repaid in total.
- $2,000 over 12 months: $400 establishment fee plus $960 in monthly fees, so $3,360 repaid in total.
Examples use the maximum fees allowed by law. Individual lenders may charge less.
In the $2,000 example, you'd pay $1,360 on top of what you borrowed. That's why it's worth checking the cheaper options below first.
Questions to ask before you take a payday loan
- Is this for a one-off cost? Small loans suit an urgent, one-off bill. They're a poor fit for everyday living costs or paying off another loan.
- Can I repay it without missing rent, bills or groceries? If not, talk to a free financial counsellor first.
- Do I already have a small loan? Taking a new one to repay another can become a cycle that's hard to break.
- Is the lender licensed? Check its Australian Credit Licence number on ASIC's professional registers.
- What's the total I'll repay? Ask for the total in dollars, not just the repayment amount.
Cheaper options to check first
- No Interest Loan Scheme (NILS): up to $2,000 for essentials, or $3,000 for bond or rent in advance, with no interest or fees for eligible people. Call 13 64 57.
- Centrelink advance payment: if you receive certain Centrelink payments, you may be able to get part of it early, with no interest or fees.
- Payment plans: most utility, phone and council providers offer payment plans or hardship programs if you ask early.
- Free financial counselling: the National Debt Helpline on 1800 007 007 is free and confidential.
Payday loans vs instalment loans
- How you repay: Traditional payday loan: Lump sum on your next payday. Small instalment loan: Regular repayments over several months.
- Typical term: Traditional payday loan: A few weeks (now at least 16 days by law). Small instalment loan: 3 to 12 months.
- Repayment size: Traditional payday loan: One large repayment. Small instalment loan: Smaller repayments matched to your pay cycle.
- Budget impact: Traditional payday loan: A big hit on one payday. Small instalment loan: Spread across several pay cycles.
How Jingle's small loans work
Jingle isn't a payday lender. Our small loans of $500 to $2,000 are personal loans repaid in regular instalments over 3 to 12 months, matched to your pay cycle. There's no single lump-sum repayment.
- Clear fees: 20% establishment fee and 4% monthly fee, with no interest. You'll see every fee and your total repayment before you sign.
- No early repayment fees: pay it off sooner and you save on monthly fees.
- Real people: a member of our team reviews every application.
- Responsible lending: we only lend if the repayments fit your budget. Approval is not guaranteed.
If you need more than $2,000, see our short-term loans of up to $5,000. Our loan fees guide explains how the costs work.
Frequently Asked Questions About Payday Loans
Credit provided by Jingle Finance Pty Ltd ACN 132 485 066 trading as Jingle Loans, Australian Credit Licence 388143, to approved applicants only. Terms, conditions, fees, charges and eligibility criteria apply. Approval is not guaranteed. This information is general in nature and doesn't take your objectives, financial situation or needs into account.
