Finding alternatives to payday loans

When you're struggling to pay bills, it can be tempting to look for a quick fix. Payday loans may seem like a simple solution but before you sign up it’s worth exploring alternatives to payday loans.

Payday lenders such as Fundo and Credit 24 provide a service to individuals who may not qualify for traditional credit options, but they have also faced criticism for their high fees, interest rates (for amounts above $2000) and lending practices.

Even pay advance apps, also known as pay on demand or wage advance apps in Australia, can end up costing you a lot in fees. Lenders such as MyPayNow and Beforepay give you early access to a portion of your next wage payment generally for a flat fee.

If you’re thinking of taking out any payday loans, you need to understand the potential consequences fully. The higher repayments might seem doable in the short term but what if you can’t repay and that amount balloons?

 

 

Think twice, borrow wisely

Take the time to explore all alternatives before resorting to payday loans like Fundo or GDay Loans or downloading the MyPayNow or Beforepay app. Other ways to access emergency funds in Australia include no or low-interest loans provided by community organisations and government initiatives.

The No Interest Loans Scheme (NILS), for example, offers low-income earners loans of up to $2000 for essential goods and services, such as heaters, refrigerators and furniture, or to pay medical, dental or vet bills. You can also borrow up to $3000 for housing-related expenses such as paying your bond.

To be eligible, you need to:

• • Earn less than $70,000 (before tax) if you're single or $100,000 if you have a partner and/or children
  • Or have experienced family or domestic violence in the past 10 years
  • Or have a HealthCare Card or Pension Card
  • And be able to demonstrate how you can repay the loan.

There are no fees or interest charged.

 

 

Falling for the hard sell

If you are struggling to pay bills such as utilities, you should be able to work out a payment arrangement with the provider. It’s a far cheaper alternative to a payday loan. The service provider may be able to give you more time to pay the bill or enable you to pay in more affordable instalments. Ring them to discuss your options but don’t leave it too late as you do not want your service to be suspended or disconnected.

If you are receiving Centrelink benefits and have an urgent bill to pay, you may be able to get an advance on your next fortnightly payment. There are no interest fees or charges. You can find out more and apply for an advance payment via the Services Australia website.

Financial counselling services are also available to help you navigate your situation and make an informed decision. To find a financial counsellor near you, visit the National Debt Helpline or call 1800 007 007.

 

 

There's no shame in seeking help when you're in a bind. Just remember there are far better ways to address financial difficulties than taking out a payday loan or using a pay advance app. In the long run, they can make a difficult situation much worse.

If you believe a payday lender is treating you unfairly, lodge a complaint with us and we’ll help you handle it.