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Payday Loans: What They Are & Why We’re Different

We’re sure you’ve seen the funny TV commercials, the radio ads and the unforgettable catchphrases from payday loan lenders.

Unfortunately, payday loans have a lower-than-average reputation (for reasons we will explain below). And this negative reputation carries over and affects responsible lenders who don’t even sell payday loans.

Let’s explore payday loans, why they rightly have the negative reputation that they do, and how Fair Go Finance is different.

What is a Payday Loan?

A payday loan is a type of loan that is short-term, immediate, and is designed to help you financially survive until your next pay check.

In theory, you should be able to pay it back with your next pay check or two.

Why Are Payday Loans Bad?

Reason 1: The Interest Rates

Payday loan providers need to make a profit, and they do so by having extortionately high interest rates on such small loans.

Interest rates vary, but payday loans can have an interest rate as high as 48% p.a. for loans under $2,000. For context, personal loan interest rates range from 6% to 23% p.a.

The unmentioned high interest rates, plus establishment fees, plus monthly fees, plus late fees, can make the true cost of a payday loan unaffordable.

Reason 2: The Late Fees

One of the biggest downsides to payday loans is that the late fees are created at the lender’s discretion.

Some are known to charge $7 a day whilst they wait for you to make a repayment. This can make a $400 loan quickly add up.

Reason 3: There are Different Borrowing Rules

Payday loan providers are also held to a different criteria than the major banks, though they are meant to lend responsibly. They may provide someone with a bad credit score a loan that they may not be able to afford.

Payday lenders are looking for a quick buck from you, they aren’t considering your full financial position and setting you up for success.

Reason 4: They Charge Everyone the Same Fees

Most payday lenders don’t reward their customers after their first loan.

To stay in accordance with the National credit act, lenders have to abide by the maximum fees which are allowed to be charged on small loans.

This means the establishment fee cannot cost more than 20% of the loan amount. And the monthly account keeping fee can cost no more than 4% of the loan amount.

Payday lenders will charge every one of their customers the 20% establishment fee and the 4% monthly fee, even if you’ve got an excellent credit score.

Do Payday Loans Hurt Your Credit?

Yep, payday loans do hurt your credit score.

Every time you apply for a payday loan, your application will appear on your credit file. If you have too many credit applications on your file, or if you’ve applied for a few in a short period of time, this will affect your ability to borrow.

Some lenders won’t loan you any money if they can see you have active payday loans, or any payday loans in a specific time frame.

And because of the way payday loans are structured, they become expensive. It’s not uncommon for people to need to take out further payday loans to pay off other payday loans, and this cycle leads to a lot of marks on your credit file.

Do You Really Need a Payday Loan?

We understand how it feels to need funds urgently but take the time to think if you really need a payday loan from a payday lender. There are some pro’s yes, but the con’s are large.

Pro’s of a Payday Loan:

  • Quick cash
  • The application form is convenient

Con’s of a Payday Loan:

  • Ridiculously high interest rates and late payment fees
  • A risky way to borrow
  • They don’t consider your financial situation, which may worsen your financial position.
  • You have to pay them back fast

The cons are not worth it, you deserve to borrow from a responsible lender who will set you up for success.

What Are Some Alternatives to Payday Loans?

Instead of borrowing from a payday loan lender, borrow from a responsible lender, like us. Responsible lenders will take the time to ensure you’re given a loan you can afford.

No Hidden Fees

When you get a Fair Go Finance loan, you won’t be surprised with hidden expenses, uncomfortably large interest rates and ridiculous late fees. You see the cost of your loan as you apply, so you know exactly how much it’ll cost.

Pay It Back Over a Longer Period

Most payday lenders sign you up to a payback period that is too short. This can lead you into being trapped in a cycle of debt, or with repayments that actually aren’t affordable.

When you borrow with Fair Go Finance, enjoy longer payment periods. This allows your weekly repayments to be manageable so you can financially get ahead.

Be Rewarded with Tiered Fees

We also have offer tiered fees. The better your credit score, the lower your fees.

For example, if you have a below average credit score, you’ll pay more establishment and monthly fees. But as soon as you pay it off and boost your credit score, your improved score will reduce your fees on your next loan.

This approach allows our customers to save hundreds of dollars in fees.

We Only Give Affordable Loans

Our aim is to give everyone a fair go, we genuinely want every single one of our customers to improve their financial position. We’ll assess your financial situation thoroughly, because we don’t want to give you a loan that will set you up for failure. You deserve to see financial success.

This combination of tiered fees, and our approach to ensuring you have an affordable loan that will boost your credit score once repaid, will leave you in a much better position than any payday lender can offer.

Let’s answer some of the common questions about payday loans.

FAQ 1: How do I Consolidate my Payday Loans?

Regrettably, this situation is all too common. Payday loans are structured in a way that can cause people to be stuck in a cycle of debt.

If you’re wondering “how do I consolidate my payday loans?” then you’re on the right path.

The idea with consolidating your debt is to improve your cash flow by combining all of your debts into one. This takes some pressure off by making your budget simpler and your debt more manageable.

To do this, look into a debt consolidation loan that has fixed interest rates (like ours). This way, you know exactly what your repayments will be, and you won’t have any hidden fees. Then, once you have the loan, pay off all payday lenders and focus your energy on your one repayment.

FAQ 2: Can I Get Payday Loans with Centrelink?

Yes, you can qualify for payday loans if you’re also receiving Centrelink.

If 50% of your income is from Centrelink, the payday loan cannot exceed 20% of your total income.

FAQ 3: What Happens if You are Late on a Payday Loan?

If you can’t afford the repayment on your payday loan at that time, you’ll be charged late fees.

These late fees are allowed to cost up to twice the amount of your loan. Missing payments is very expensive if you borrow from a typical payday loan provider.

FAQ 4: Are Fair Go Finance a Payday Loan Provider?

Nope, Fair Go Finance is different to payday loan providers. We offer longer payback periods, we’re transparent with our fees and we reward our customers with tiered fees.

Let’s Summarise Payday Loans

A payday loan is a small loan designed to help you financially survive until your next payday.

There are a few reasons why you shouldn’t get payday loans from payday lenders, the interest rates are incredibly high, the late fees are huge, not all lenders are responsible and may leave you in a worse financial position, and everyone’s fees are the same.

The benefits include receiving cash quickly, but they are lost when you consider the consequences.

Payday loans are not designed to leave you in a better financial position. Instead opt for a loan from a responsible lender who is upfront about all fees, has tiered fees so their customers save money, and will work to ensure your loan is affordable.

If you feel like you’re stuck in a cycle of payday loans, debt consolidation is a great way to break the cycle. With a debt consolidation loan, you can pay back the costly payday loans and focus on one simple loan repayment.

When you’re considering a loan, you should always ensure the lender you’re borrowing from is responsible who truly has your interests at heart. With the right lender, you can see financial success.

If you’re looking for a payday loan, but don’t want to borrow from a payday lender, use Fair Go Finance. We offer affordable loans, our fees aren’t hidden, and our goal is to set you up for success. Apply now!

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