A bad credit payday loan allows you to borrow even if you have bad credit. These lenders either specialize in or offer loans for bad credit applicants. Unlike traditional lenders, payday lenders have a different lending criteria. This allows them to offer loans to borrowers with bad credit. They will look at your ability to repay the loan and not your overall credit history.
That said, they will still perform a credit check. There are also eligibility requirements you will have to meet to qualify for a loan.
These loans usually have short terms and small borrowing amounts, usually less than $2,000. There are also loans up to $5,000 and $10,000. Loan terms can be as short as 16 days but some loans have terms up to 1 or 2 years.
They are easy to apply for, and feature fast approvals and turnaround times. While this is a form of quick finance, it is also expensive finance. There are high fees and charges associated with this loan.
Lenders will take into consideration your current employment, earnings and sources of income. This can include government benefits like Centrelink, which has to be less than 50% of your total income.
They will also look at the last 90 days of your bank statements. This is to determine whether you can repay the loan.
Not all payday lenders offer loans for bad credit applicants, but most do. It’s best to check the lender’s criteria before applying.
A selection of bad credit payday loans
Are there guaranteed loans for people with bad credit?
There is no such thing as a guaranteed loan. If a lender offers you “guaranteed” finance, it is most likely a scam. It goes against ASIC’s responsible lending guidelines. Even if payday lenders are flexible, you’ll still have to meet their eligibility requirements. The same applies for other loans you may be able to apply for. Some of these loans include:
- Pay on demand. This is a short-term loan that allows you to borrow a part of your paycheque in advance. In return, you pay a small fee to the lender. While you can only access money you’d be paid anyway, there may still be a minimum income requirement. You will also have to pay the fee by your next payday.
- Buy now, pay later. This is an interest-free form of finance that lets you buy now and pay the lender back in instalments. This is not like a traditional loan, and is tied to your shopping basket. Although these lenders don’t charge interest, there may be fees involved. These can include monthly account-keeping fees, payment processing fees or early exit penalty fees. There are also late fees. Most platforms will perform a soft credit check, so if you have major defaults, you may not be eligible.
- No Interest Loans Scheme (NILS). If you earn less than $45,000 a year (after tax), you can apply for this no-interest loan. It is offered by 170 local community organizations across 600 locations in Australia. It is designed to enable the purchase of essential goods and services. You can borrow between $300 and $1,500.
- Centrelink cash advance. If you receive Centrelink payments, you may be able to bring them forward as a cash advance. This is not an additional payment, but an advance on your existing payments. You may be eligible depending on how long you have been with Centrelink and how much you receive.
- StepUP loan. You can apply for this if your income is low. It will allow you to borrow between $800 and $3,000 at a rate of 5.99% p.a. You can use this to pay for essential goods and services.
What are the features of a bad credit payday loan?
Here’s what you can expect when you apply for a bad credit payday loan.
- Online applications. Applications for these loans are online. They are usually short and take a few minutes. You’ll receive a response within 60 seconds of applying.
- Quick turnaround times. After you’ve signed the loan contract, you could receive the funds within 1 to 24 hours. Most lenders offer a 1-day turnaround time at the least. If the application is submitted by the cut-off time (usually 4pm), the funds should arrive the next business day.
- Small to medium sized loan amounts. Lenders offer various loan amounts that can range between $100 and $2,000, up to $5,000 and in some cases, $10,000.
- Short loan terms. Payday loans typically feature short loan terms. It can be as short as 16 days to 12 weeks, or from 12 to 24 months, depending on the loan amount. Some lenders may allow you to repay the loan early without penalty.
- High fees. Lenders operate under strict guidelines set out by ASIC, so your fees will be in line with this. That said, payday loans are an expensive form of finance. Most lenders will charge the maximum amount allowable. These fees include establishment and monthly fees, usually set as a percentage of the amount you’re borrowing. Interest is also charged for loans above $2,000.
- Regular repayments. You’ll have to make your repayments on a regular basis. This could be weekly, fortnightly or monthly, depending on the frequency of your pay. The repayments can be directly debited from your account.
How much does a payday loan cost?
Lenders are banned from offering loans of $2,000 or less with a repayment window of 1 to 15 days. The fees on loans of $2,000 or less, with a repayment window of 16 days to 1 year, are also capped.
If your lender is charging you more than these fees, it is breaking the law.
- Fees for loans under $2,000
Establishment fees: This fee covers the cost of setting up the loan, and is a one-time fee. It is capped at 20% of the total borrowed amount.
Monthly account fees: Monthly fees are capped at 4% of the principal.
- Fees and interest for loans between $2,001 and $5,000
Establishment fees: This fee covers the cost of setting up the loan, and is a one-time fee. It is capped at $400.
Interest: Interest is capped at 48% p.a. of the principal.
- Fees and interest for loans above $5,000, with a 2-year term
Interest: Interest is capped at 48% p.a. This includes all fees and charges.
Apart from establishment and monthly fees, there are also other fees you should look out for. These include:
- Government fee. This covers government duties, if any, but most lenders don’t charge this.
- Default fees. You will be charged a default fee if you miss a payment or fail to pay. You can be charged up to 200% of what you borrowed.
- Enforcement expense. You could be charged for enforcement expenses if you default on your loan. This is to cover the cost of going to court to recover the money you owe.
The cap on fees and ban on short-term loans doesn’t apply to loans by Authorised Deposit-taking Institutions. These include banks, building societies and credit unions. They also don’t apply to ongoing credit contracts, like credit cards.
Why do bad credit payday loans cost so much?
Bad credit payday loans are one of the most expensive forms of finance. This is because they are both risky for lenders and easy for borrowers to obtain.
Bad credit borrowers are considered more risky because their credit file has negative listings. This can be because they didn’t pay their debts on time. These debts can include other loans, credit cards or bills. Multiple credit applications and rejections can also have a negative impact on a person’s credit score. To offset the risk of lending, lenders charge more.
These loans feature innovations which allow for quick approval and turnaround times. It includes licensing third-party, encrypted platforms like Credit Sense. It is used to access read-only versions of your bank statements.
This convenience comes with a downside – the cost of the loan. As it’s easy to get credit, it may be tempting to apply even when it’s not an emergency. The high costs could lead to unmanageable debt, which could trap you in a debt spiral. If it is likely to add to your financial problems, you should avoid it.
You should only apply for a payday loan if you absolutely need to and if you’re 100% confident you can pay it back.
What are the pros and cons of bad credit payday loans?
- Online applications and quick turnaround times
- Fixed rates and charges that don’t change throughout the loan term
- Available for bad credit applicants
- High fees and charges
- Not a long-term financial solution and could lead to further financial problems
- Disreputable lenders may be operating online. You should always research the lender before applying
What can I use a bad credit payday loan for?
You should only apply for a payday loan in emergency financial situations when no other form of credit is available. Given how expensive these loans are, you shouldn’t rely on them as long-term financial solutions.
The following are some examples of financial emergencies:
- Medical bills
- Car repairs
- Unavoidable home repairs or purchases
You should avoid using them for:
- Everyday necessities; If this is the case, you should consider a longer-term solution to your credit needs
- Repayments for existing debts; Taking a loan to pay for another loan may make your debt problem worse. You may end up paying more in fees and charges and get into further debt
- Big-ticket items like cars
- Other non-essential expenses and purchases that can wait
If you are struggling financially, you should speak to a financial counsellor first. There are also payday loan alternatives you should look into before applying for a payday loan.
What is the eligibility criteria for a payday loan?
The requirements will vary between lenders and specific loans, but you’ll usually need to meet the following:
- Residency. Must be an Australian citizen or permanent resident.
- Age. Over 18 years of age.
- Income. Receive a regular income, either through employment or Centrelink benefits. Many lenders won’t give you a loan if government benefits are your primary source of income.
These are just some examples of the criteria you’ll need to meet, so make sure to check the specific eligibility requirements when you’re comparing your options.
How can I compare payday lenders?
By comparing loan options, you could find a loan product that suits you best and allows you to save. Contact the lender if you have any questions. You should also read through reviews and online testimonials before applying.
While comparing, you should keep the following in mind:
- Rates and fees. You should make note of all fees and charges. This includes additional fees that may be applicable.
- Loan term. Loan terms are typically short, ranging from 16 days to 24 months. Longer loan terms mean lower monthly repayments. But you also end up paying monthly fees for longer. All these costs add up and make the loan more expensive. You should also only apply for a loan if you can repay within the agreed loan term.
- Loan amount. Loan amounts are usually up to $2,000, but you may also be able to get up to $5,000 or $10,000. How much you’re approved for will depend on a number of factors. This includes your income, credit history, the loan amount you’ve asked for and your ability to repay the loan.
- Repayments. Your repayments will be structured around the income you receive. This can be weekly, fortnightly or monthly. Before applying, you should calculate the cost of your repayments. It can help you determine whether they fit into your budget. Some lenders will allow you to repay the loan early. This can help you save on fees and charges.
- Turnaround. If you need the funds fast, you should consider how long lenders take to deposit the money in your account. Some can issue funds within 30 minutes or a few hours, while others can take longer.
- Loan extensions. Some lenders can extend your term by 90 days. This extension will come with extra fees, so you should avoid it if possible. Before signing the agreement, ask the lender the terms and conditions regarding defaults.
How can I improve my chances of getting approved for a bad credit payday loan?
The most significant ways to improve your chance of being accepted for a bad credit personal loan include the following:
- Make sure the lender accepts bad credit applicants. Not all payday lenders accept bad credit applicants, so ensure that your chosen lender does before submitting an application.
- Check the eligibility criteria. Make sure that you meet the lender’s eligibility criteria before applying for a loan.
- Check the minimum income. Do the requirements include a minimum income? Even if the lender in question accepts applicants with bad credit, if your income doesn’t meet the criteria, you may be rejected.
- Don’t over apply. Applying for multiple payday loans in a short space of time may see your application rejected.
What should I do before applying for a bad credit payday loan?
Before you apply for a payday loan, or any loan for that matter, you should consider the following:
- Check your credit score. Before applying for any loan, you should check your credit score first. In general, it’s good practice to check your credit report at least once a year. You can check your credit score for free here. By knowing your score, you will know what to expect when you apply for credit and also why a lender rejected you. If your score isn’t as bad as you think, it may also open up finance options apart from payday loans. Some of these options may be cheaper.
- Consider other alternatives. You should only apply for a payday loan if you’ve exhausted all your options. It should be your last resort. Before applying, you should look into your alternatives. Can you get a loan from a family member or friend instead? Can you ask for an advance on your paycheque or use a pay-on-demand app? Have you looked into whether you qualify for a no-interest or StepUp loan?
- Improve your credit score. The best way of improving your chances of getting credit is by improving your score. Your credit score is updated every month. This means that everything you do to improve it now will have an impact in the long run. Some of the steps you can take to improve your credit score include:
- Paying all your bills on time. This includes utility, rent, mortgage or your credit card bills. This shows your commitment to changing your negative credit behavior.
- Paying off your debt. If you owe money, you should work on paying it off.
- Lowering your credit card limit. If you have a high limit you’re not using, you should contact your bank and lower it.
How long does it take to get a bad credit payday loan?
This will vary from lender to lender. Payday loans generally have fast turnaround times. Most lenders will ask for your online banking details. This is so they can access a read-only version of your bank statements. This enables them to provide fast loan approvals.
We’ve compiled a list of payday lenders with a comparison of their turnaround times.
|Lender and loan product||Turnaround times|
|Sunshine Short Term Loans||30 minutes|
|Nimble Short Term Loan||1 hour|
|Jacaranda Finance Personal Loan||Under 1 hour|
|Fair Go Finance Small Loan||24 to 48 hours|
What happens if I miss a payment?
Missing a payment on your payday loan can be expensive and can have legal repercussions.
If you’re unable to meet your repayments by the due date, you should contact your lender immediately.
The lender may be able to reschedule your payments, free of charge.
If you’re facing financial hardships, you should contact your lender. It may have measures in place to help you restructure your loan or help you reduce costs.
If you fail to contact your lender before defaulting, you could face the following:
- Bank charges. If you don’t have enough money in your account, the lender will not be able to debit the payment. Your bank could charge you for missing the payment. The fee is usually around $5 to $10 per missed payment, depending on the bank.
- Overdraft fees. This is applicable if you have an agreed overdraft with your bank. The loan payment will be taken from the overdraft if you don’t have enough funds. Your bank will charge you fees or interest on this borrowed money.
- Dishonor fees. The lender will charge this when you don’t have enough funds in your account for the direct debit to be processed. The fee will vary from lender to lender, but there is no imposed limit on what you can be charged. It could be $15 per payment, but it could also be as high as $55.
- Late payment fees. You could be charged this for making a late payment. Payday lenders can charge either dishonor or late payment fees, or both. There is no limit as to what you can be charged for late payments.
- Collection calls. You may receive collection calls from the lender if you miss a payment and fail to inform them.
- Repossession of property. If your payday loan is secured and you fail to repay, the lender can repossess your asset. If your loan is unsecured, as most payday loans are, your lender has no right to repossess your property.
- Damaged credit rating. Missing payments can damage your credit score. If you already have a poor credit score, this could make it worse.
- Possible legal action. If you continue to miss your repayments, the lender could take legal action against you.
Can I get a low interest bad credit payday loan?
A bad credit payday loan with low interest is unlikely. This is because a bad credit score presents a higher risk to lenders. As a result, most payday lenders will charge the highest fees they legally can. However, some lenders may charge less than the maximum fees payable. You won’t find a cheap or low interest option, but you may be able to find a comparatively cheaper payday loan.
You may, however, be offered a lower interest rate on a secured bad credit loan. With an asset as security, the lender’s risk is reduced. The asset will have to be equal or greater in value to the loan amount. Secured payday loans can be risky as the lender has the right to repossess your asset if you default on the loan.
What is the eligibility criteria for a bad credit payday loan?
The criteria varies between lenders. You should check if you meet the lender’s specific requirements. In general, you will need to meet the following:
- Age. You have to be over the age of 18 to be able to borrow legally.
- Residency. You must be an Australian citizen or permanent resident.
- Income. Your income must be regular. It can be from employment or Centrelink payments. In most cases, your Centrelink income cannot be your primary income. It may have to be less than 50% of your total income.
To apply for a payday loan, you should first compare lenders. Once you’ve settled on a lender, click “Go to site” to visit the lender’s website. You can then submit an online application.