What Are Payday Loans in Melbourne?

Even if you are financially stable, it may happen sometimes that you run short of money to pay the utility bills. You may be confused about what to do next.

Don’t worry! There is the option of payday loans available to you.

Payday loans are specifically designed for individuals who need immediate financial help.

In this guide, we will give you all the information about payday loans, their benefits, their risks, and other alternative options for them if you think they are unaffordable.

Let’s start!

What Are Payday Loans in Melbourne and why they are different?

According to the Australian Securities and Investments Commission (ASIC), payday loans are small amounts of money granted to borrowers during emergency situations. It is referred to by different names like small amount loans, cash loans, small loans, short-term loans, and others.

Payday loans are also known as small-amount credit contracts or SACCs. If you are borrowing for payday loans, then there are certain laws of payday that you have to keep in mind.

• Payday loans can be taken starting from $100.
• The maximum amount of borrowing is $2000.
• It has to be repaid usually between 16 days and one year.
• There are no interest rates on payday loans.
• Lenders charge fees that cost instead of interest rates.

They are different from other loans in the sense that they are easily approved and also take less time to approve. They provide financial assistance in the time of crisis. The money can be returned when the borrower gets his or her next payment.

But it has higher fees, which means that when you return the money, you have to pay more than or almost double what you borrowed. Each lender has fixed:

• The establishment of the loan is 20% of the total money borrowed.
• For monthly fees, it is 4% of the total amount borrowed.

It is advisable to avoid taking payday loans, as it may seem easy and flexible, but underneath it is higher fees and rates. Sometimes, it may happen that in order to clear your previous loans, you end up borrowing more to clear previous records.

What are the eligibility criteria for payday loans?

The eligibility criteria for payday loans are simpler than for other loans, as your previous bad credit history won’t affect your chances of getting this loan.

However, there are some basic criteria that are common throughout Melbourne. Those are:

• You should be a citizen of Australia.
• Your age should be above 18 years.
• Your job should be above 3 months old.
• A fixed income is coming to you to return the money.
• Bank statements of the last 90 days should be submitted along with the application form.

Some of the rules that the lender has to follow are:

Payday loans are generally provided by small private lenders rather than banks or other credit bodies. From the side of the lender of a payday loan, there are some precautionary measures that they have to follow for maintaining the smooth functioning of the process. Those are:

• Payday lenders cannot seize security such as cars for a payday loan.
• Payday lenders have to take and analyse 90 days of your bank account statement before approving your loan so that they can analyse if you can afford that loan.
• A payday lender has to check the credit history of the last 90 days and see if you have an existing debt or not. In case you have an existing loan and the payday lender provides you another one, s/he has to prove that you will be able to repay the loan.
• The customer should be made aware of the high cost of small amounts of credit and other substitutes if they are applying for the payday loan.

How Do Payday Loans in Melbourne Work?

These are the following steps that take place in a payday loan.

1. Application Submission: First, you have to search for a lender online or offline, whichever you like; then you have to fill out the application form stating how much money you want to borrow and when you will return it. Submit all the related documents along with the application form.
2. Approval: Once the lender receives your application, they will verify it, and if they think you will be able to repay the loan, then they will send you a verification e-mail.
3. Funding: Then, the money will be transferred into your account after some time but within 24 hours.

The Benefits of Payday Loans in Melbourne:

Since this loan is easily accessible to people, it has several benefits to them.

1. Fast Loan Processing: The cash money gets easily available to you in a short time span since it is a quick cash medium.
2. Easy Approval: The process of application submission and approval is quite easy; there is no extra paperwork except for the essential documents.
3. Minimum Eligibility Criteria: Payday loans require only the basic eligibility criteria, like your age, residency in Australia, and credit history of the last three months.
4. Option for People with Bad Credit: Lenders usually check the history of the last three months, so you will get the loan even if you have bad credit, as the amount is considerably less.
5. Accessible in an emergency: Pay loans cater mostly to emergency situations and provide immediate cash to meet financial crises.
6. Paperless Application: It is completely an online process.
7. No collateral required: In Melbourne, many lenders provide unsecured pay loans, so there is no need for collateral.
8. Same Day Loan: As the name suggests, the borrower will get money the same day of application.

The Risks of Payday Loans Melbourne:

While there are several benefits of payday loans, there are also certain hidden risks that the borrower may overlook due to their shiny qualities.

1. Higher interest rates: Though the lenders are not legally allowed to tell the interest rates, the cost of establishment fees (20%) and monthly fees (4%) will increase the interest rates. It may become hard to repay the loan with such huge costs.
2. Short repayment period: Lenders generally give you time until next payday to clear off your loans, which means that when your next salary arrives, they will automatically deduct the loan amount from your account.
3. Running in Debts: It may occur that in order to clear off your debt from one lender, you may take a loan from another lender, and the process follows. If you are not able to repay all the loans, then it may affect your credit score and running in debts.

Are payday loans ever a good idea?

It completely depends on you; how will you utilise the money, and will you be able to repay it? Take the loan when you are clear that you will be able to repay the loan in time and can afford it.

There are many lenders in Australia that are registered under the government. Check and verify before taking the payday loan. You don’t have to worry about their authenticity, as their rules and regulations are set by the government, and they have to follow that.

Suitable Alternatives to Payday Loans in Melbourne

Payday loans offer quick cash, but before taking it, there are also other better quick and easy cash options for you. You can also check those loans and their terms before going for payday loans.

• Personal Loans: A personal loan is similar to a cash loan, but they offer lower interest rates and longer repayment time periods.
• Buy Now, Pay Later: It allows borrowers to pay back the amount in 4 instalments in a time period of 6 weeks. It does not take interests or any other fees.
• No-Interest Loan Scheme: It offers loans in emergency situations and does not take any interest up to $3000.
• National Debt Helpline: If you are struggling extremely with financial conditions, then you should take the help of a financial counsellor. National Debt Helpline offers financial support to people with debt and keeps it confidential. It runs under a government organisation.

CONCLUSION

Payday loans in Melbourne offer easy, quick cash to people in a short time. However, it comes with several risks, like higher interest rates and a short repayment term. So, careful decisions from individuals should be taken to avoid running into debts.

We at ‘Car Finance for Pensioners’ provide financial guidance to people in distress. We understand how difficult it is for people to take the right decision at the right time.

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