Payday loans can be an important lifeline but before you take one out make sure you know the risks.

What is a payday loan?

Payday loans are very popular. These types of loans are unsecured short term loan. They are called payday loans because they way they work is that you borrow a small amount of money, usually between $100 and $1,000, that you repay plus interest on your next payday. These types of loans are designed to tie people over until they get their next t pay cheque comes in. Payday loans are also extremely fast. You can apply, get approved and have the money in your account often on the same day. Some lenders can even get the money to you in as little as 15 minutes!

Once you have the money you can use it however you please. However, you should only take out a payday loan for an emergency. For example, if you need to pay for home repairs that cannot wait or you need to urgently pay off a bill before you risk have your electricity shut off or you want to avoid a fine, then payday loans can be important lifelines. They are also useful if you need a small cash injection just to get you by until your pay cheque comes through. However, a payday loan should only be used as a last resort because there are risks involved.

Am I eligible to get a Payday Loan?

Payday loans are extremely popular because almost anyone can get one. There are minimal credit checks required so you can get one whatever your financial history. This means even if you have bad credit score or have been refused a loan elsewhere you will be eligible. In general you will find that the only requirements are that you are over 18 and have an Australian bank account.

What are the risks?

Payday loans should be treated with caution. The main disadvantage is that the interest rates on these loans can be very high because you can get one whatever your credit history and you do not have to put up any assets to secure the loan. This makes them very expensive. Remember that payday loans are for short term borrowing and should never be used to solve any even long term financial difficulties you might have. As the interest rates can be very high if you fail to make repayments on time you could end up in deep financial trouble. Late charges and interest fines can easily accumulate. Also with payday loans by missing payments you can risk damaging your credit score which will be used against you in the future when applying for financial products.

Finding a Payday Loan

As payday loans are so popular there are many lenders vying for your business which can make finding a good loan difficult. It is definitely worth taking the time to research the market to see what is on offer. You can use the table above to find the right payday loan for you by comparing different loans and lenders against each other. Before you take out a loan make sure you understand what happens if you miss payments and always read the terms and conditions fully so there are no surprises. If you have any questions dont be afraid to ask the lender.