Payday Lending Explained
What is a payday loan?
When in high financial stress, sometimes we make decisions that may feel like the best thing at the time, but they can sometimes cause greater stress. For example, the car has broken down, you get behind in payments and then an unexpected bill comes in. This is when we can make risky or unwise financial decisions.
When in need of money, an option is to ask a friend for a loan, sell things, or get a short term loan from a pay day loan provider or a buy now-pay later provider. This is where the trouble can start.
Often, payday loans, or buy now-pay later schemes have hidden fees or conditions that can create a worse situation when already faced with financial hardship.
Knowing and understanding pay day loans and other options, allows for good and informed financial decisions to be made.
What do I do if I need a quick loan?
See below for other options that are available instead of a pay day loan.
The No Interest Loans Scheme (NILS) is a safe and affordable alternative to payday loans. NILS is a community returns initiative to assist low income households access credit in a safe way. NILS offers loans up to $1,500 and can be used for household items, medical procedures (including dental), education essentials, car repairs or registration and other items as requested. The loans have no interest, and can be repaid over 12-18 months.
Am I Eligible?
To be eligible, there are eligibility criteria that need to be adhered to. This includes:
- Holding a Health Care Card / Pension Card, or
- Earn less than $45,000 per year after tax ($60,000 for couples or people with dependents)
- Residing at the same residence for the past three months
- Show capacity for returning the loan.
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StepUp loans are similar to No Interest loans. With a StepUp Loan, you can borrow between $800 and $3000. Loans provided by StepUp have a low interest rate of 5.99% per year, and can be repaid over a period of three years. StepUp loans can go towards a variety uses, including medical, education, cars and their repairs, white goods, and furniture.
Am I Eligible?
To be eligible for a StepUp loan you must:
- Hold a Health Care Card/Pension Card, or receive Family Tax Benefit A
- Reside in your current premises for more than 3 months
StepUp loans are provided by Good Shepard MicroFinance, who also facilitate NILS and Speckle loans.
Remember when taking out a loan to consider if it is the best option for you.
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If you are a Centrelink recipient, you may be eligible for a Centrelink advance. Centrelink offers its recipients an advance on their payments which can be repaid over a series of weeks or months through deductions of Centrelink benefits.
Centrelink Advances vary from benefit to benefit, this includes amount and frequency.
There are lots of services that can help you. Click here for more information
Things to look out for in loans
If you do decide that a pay day loan is for you, below are some things to consider: