Quick answer
Payday loans are small amount credit contracts of up to $2,000, repaid over 16 days to a year, and they can cost far more than the amount borrowed. Alternatives include no interest loans, Centrelink advance payments, hardship arrangements with billers and, for bigger needs, a secured loan. Ownright does not arrange payday loans, but we can look at better-fitting options.
Key points
- Payday loans are legally capped at $2,000 but can still cost a lot
- No interest loans and Centrelink advances can be far cheaper where eligible
- Billers often offer payment plans if you ask early
- Ownright can look at secured or consolidation options for bigger problems
- Suits
- Anyone short of cash and weighing up a payday loan
- Security
- Payday loans are usually unsecured; alternatives vary
- Ownright's role
- We do not arrange payday loans; we look at alternatives
- Australia-wide
- Yes
What are the main alternatives to a payday loan?
If you are short before payday, a payday loan is rarely the only door. In rough order of cost, MoneySmart points to these:
- No interest loans. Community-run loans, for essentials such as appliances, repairs, bonds or rates, with no interest or fees. They are limited to people on lower incomes or with certain concession cards, and you need to show you can repay.
- Centrelink advance payments. Many people receiving Centrelink payments can ask for an advance, with no interest or fees.
- More time from the biller. For utilities, fines and many bills, a hardship arrangement or payment plan can pause the pressure without a new debt.
- A free financial counsellor. The National Debt Helpline (1800 007 007) can connect you to one.
Only after those are exhausted does it make sense to compare paid options.
What does a payday loan cost?
By law, a small amount credit contract is limited to $2,000, with a repayment period between 16 days and one year. Fees are capped, but the caps still permit a high total cost. MoneySmart’s own example shows a $2,000 loan repaid over a year costing about $1,360 more than the amount borrowed.
Licensed lenders are also expected not to lend if they think you cannot repay or it would cause serious hardship. That protection is only as good as the information you give, so be accurate.
Payday loan versus other short-term options
| Option | Cost profile | Who it suits | Watch out for |
|---|---|---|---|
| No interest loan | No interest or fees | Lower-income households with concession cards | Eligibility rules |
| Centrelink advance | No interest or fees | People receiving eligible payments | Smaller future payments |
| Payment plan with biller | Often no extra charge | Anyone with a specific bill | Needs a call early |
| Payday loan | Capped but high | Short emergencies when nothing else works | Fees, repeat borrowing |
| Buy now pay later | Fees if late | Purchases | Pile-up of instalments |
| Secured or personal loan | Priced on circumstances | Larger, longer needs | Security may be at risk |
Our page on buy now pay later goes through that option in more detail.
When is a loan the right answer?
Sometimes the problem is bigger than one bill. If you are juggling several small loans, store cards and overdue accounts, another small loan can keep the cycle going. In that case the useful question is whether the total debt can be restructured into one repayment that fits your income.
That can mean debt consolidation, a personal loan with a realistic term, or, for homeowners, a longer-term structure. Each has trade-offs, and a longer term can lower repayments while raising the total cost, as MoneySmart’s examples show.
What do lenders look at when you borrow?
- Income and its stability
- Everyday living costs
- Existing debts and repayment conduct
- Recent credit enquiries
- Any security you can offer
Lenders also check your credit file. If past payday loans appear, it helps to know how they are read, which our guide on payday loans and your credit file explains.
How does Ownright help?
Ownright Custom Finance does not arrange payday loans, and we would not want to push anyone toward one. Our edge is finding solutions other brokers do not know exist, including for people who have been turned down elsewhere. Trevor Scott and the team work Australia-wide from our Knoxfield, Victoria office.
If a free option can solve the problem, we will say so. If you need a proper loan, we look at bad credit personal loans, emergency loans and, where there is property, private lending. Speed depends on the lender, the security and how fast documents arrive. Tell us what is going on and we will look at what is available.
An illustration
Illustrative scenario only. A casual worker has three small loans, a few overdue bills and a car registration due. Another small loan would simply move the problem forward. A broker might suggest calling a financial counsellor first, asking the biller for time, and then looking at whether a single consolidated loan with a sensible term is realistic.
Mistakes to avoid
- Taking a second payday loan to cover the first
- Hiding other debts from a new lender
- Ignoring free hardship options
- Choosing the longest term without checking the total cost
- Applying to many lenders at once
Documents to have ready
- Photo ID
- Recent bank statements and payslips or income evidence
- A list of every loan, card and bill, with balances
- Any letters or arrears notices
See how to get loan ready for a practical checklist.
How do you ask a biller for more time?
Most utilities, telcos, councils and many other creditors have a hardship team. The process is usually simple: contact them before the due date, explain that you are having trouble paying, and ask what payment arrangements are available. Having a figure in mind, such as what you can pay each week, helps. Ask for the arrangement in writing. Many people never make that call because they assume it will be awkward, but creditors hear it all the time, and it often costs less than borrowing to cover the bill.
What about rent, bond and vehicle costs?
Some of the heaviest short-term squeezes come from a rental bond, a car repair or registration. Community no interest loans may cover items such as these for eligible households. For larger vehicle costs, our pages on car loans and bad credit car loans look at borrowing against the vehicle itself, which is often a more structured option than a small unsecured loan.
Why do repeat small loans get so expensive?
A payday loan is designed to be short. When the repayment arrives before the next pay can absorb it, the pressure is on to borrow again. Each new loan carries its own fees, so the cost compounds, and the pattern can show on your credit file. If that is already happening, the most useful step is to interrupt the cycle: stop borrowing, list everything owed, and talk to a free counsellor. Once you can see the pile, you can decide whether a single loan with a sensible term might replace it.
What can lenders do differently from a payday lender?
A conventional lender assesses repayments over a longer period, which can mean smaller, steadier instalments, and sometimes an interest structure that fits your income. A secured lender may look at the asset as much as the credit file. These loans carry their own risks, which is why we explain the trade-offs rather than simply pushing a product. Our guide on how to improve your credit score is also worth a read if past small loans are holding you back.
Need something better than a payday loan?
Sounds like you want a more sensible way to cover a short-term squeeze. We’re the lending experts at finding options beyond payday lenders, so click the button below and see if you qualify.
How it works, step by step
- 1
Step 1
Tell us what the money is for and what is due, and when.
- 2
Step 2
We point out free or lower-cost options worth trying first.
- 3
Step 3
If a loan is the right tool, we look at what is available for your circumstances.
- 4
Step 4
You decide, with the costs and consequences set out clearly.
Frequently asked questions
What is a payday loan?
A payday loan, also called a small amount credit contract, lets you borrow up to $2,000 and repay over a period between 16 days and one year. MoneySmart notes that repaying a $2,000 payday loan over a year could cost about $1,360 more than the amount borrowed. Fees are capped by law but can still add up.
What are the cheapest alternatives to a payday loan?
Where you qualify, a no interest loan from a community provider is typically the cheapest, followed by a Centrelink advance payment if you receive eligible payments. Asking a biller for more time through a hardship arrangement can also avoid borrowing altogether. MoneySmart lists these and how to find them.
Can a financial counsellor help with payday loan debt?
Yes. Financial counsellors are free, confidential and independent. The National Debt Helpline on 1800 007 007 can connect you with one, and they can negotiate with creditors, explain your rights and help you plan. Reach out early, as options narrow once arrears build.
Do payday loans affect getting a home loan later?
They can. Lenders look at conduct on your account and recent small-loan activity, and frequent short-term borrowing may raise questions about cash flow. It does not always rule you out. Our guide on payday loans and your credit file explains what lenders typically see.
Can Ownright arrange a payday loan?
No. Payday loans are not something we arrange. What we can do is look at what is available for your situation, such as a personal loan, a secured loan or consolidating existing debts. We can often point you to a better-fitting option and explain the trade-offs first.
I already have several payday loans. What can I do?
Stop and take stock. List each loan, its balance and its repayment date, then talk to a free financial counsellor. Depending on circumstances, consolidating into one more manageable loan may be possible, but only if it genuinely reduces the total cost. We can look at whether that is realistic.