Updated November 21, 2022 –If you find yourself short on cash before your payday comes around, you might start to consider a small cash loan that will pay you a cash advance before you get your paycheck.
Cash advance loans, or payday loans, are short-term cash loans with a high-interest rate (although you do get interest-free options) that are based on your income.
These quick personal loans are typically a portion of your next paycheck, which will put you in a good financial position as you will be able to repay them quickly.
This article will tell you how small-amount loans work and how you can get a loan amount to see you through until your next payday.
What are Payday Loans?
A payday advance loan (also known as a payday loan, cash loan, or cash advance loan) is a quick loan that does not require any collateral, however, they do have extremely high-interest payments.
These types of loans are considered predatory, as they have no consideration of the borrower’s ability to make monthly repayments and can also have additional hidden fees.
When taking out a payday loan without a payment plan, you can rack up a lot of debt before the next pay cycle.
Despite this, these cash loans are great short-term loans if you know you can repay them on time. They can be used to pay off existing debts, or for managing bills.
Fixed or Variable Loans?
The point of advance payment loans is to pay off the debt in one go when you get your paycheck. These loans are therefore fixed, meaning the interest rate does not fluctuate over your repayment term.
Your loan service provider may not even directly charge interest, they may include interest as a fixed flat fee that can be charged.
Secured or Unsecured Loans?
Payday loans do not require you to put up any assets as collateral and as such they are unsecured.
The lender might ask you for access to your bank statements, and will then ask permission to automatically take money from your bank account (meaning you have to provide your bank details) when your paycheck comes in.
It is an Australian Government requirement that lenders cannot include as a condition of a payday loan the authorization from the borrower for recurring electronic transfers.
How long do payday loans stay on my report?
The record of a traditional loan can remain on your credit report for many years, which impacts your future loan opportunities.
Payday lenders will often not report the loan to the credit bureaus, meaning it will never show up on your credit record. If you repay your loan on time, your credit score will not be affected.
How to Get a Payday Loan
Payday loan lenders are mostly small establishments that have an on-site credit application process, although some payday lenders are online.
To apply for a payday loan, you have to show your payslip so that the lender can see your current income.
The lender will then base their loan amount on your short-term income. There is unlikely to be an establishment fee or monthly fee, and the lender will not do a full credit check.
Can you get a payday loan without a bank account?
It is possible to get a loan without a bank account, as some lenders may be willing to accept a prepaid card account.
If you are on government benefits in Australia, you can ask to get a payday loan through Centrelink. Centrelink payments can be anywhere from $50 to $5,000 and can be paid out on the day of your application. You simply complete an application form with the required information.
The benefits of Centrelink loans are:
- There is a fixed flat fee and no interest charges
- You can apply online
- You can use it for future benefits
- It allows for cost-effective payments.
Payday loans are short-term loans that are meant to cover your expenses until you receive your next paycheck. The caveat is that these loans may come with high-interest rates, but you can take receive them without any collateral.
You also do not necessarily require a bank account to be eligible for a payday loan.
With the many types of personal loans available, borrowers need to do their research and be certain that they can repay their payday loans with their next paycheck.
If not, they should consider alternative quick cash loans, like a secured personal loan.
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