A smarter alternative to payday loans

Jul 6, 2022 | Finance, Personal Loan

Payday lenders are flourishing and while their advertising makes it all sound so simple, there’s always a price. Here is a better solution.

Tara decided to replace her clapped-out car with a shiny new one. The repayments were affordable: $350 per fortnight over three years – easy!

All was going well until a month arrived that had five weeks instead of four. Tara’s fortnightly repayment cycle fell on the fifth week meaning that her monthly salary had to stretch to three loan payments instead of two.

She considered discussing the situation with her bank but was worried about admitting her difficulty.

After seeing an advertisement for payday loans, Tara phoned the credit provider and the consultant explained the following:

  1. Applicants provide income and expense evidence for past 90 days.
  2. Loans are up to $2,000 payable between 16 days and one year.
  3. Repayments are automatically deducted from the borrower’s salary or bank account.
  4. Upfront costs are 20 percent.
  5. Monthly fees are 4 percent.

Tara saw no other option and borrowed $350 for her car payment. The credit provider sent a summary statement:



Establishment fee (20% of $350)


Fees (4% per month)


Total repayment



The $434.00 was deducted from Tara’s bank account next pay. For the following month, she tightened her belt and scraped through – just.

Later that year Tara broke a front tooth playing netball. The repair costs were way beyond her means but it had to be done.

Though she wasn’t keen on another payday loan, Tara’s history with the provider meant the application process was quicker and easier.

Repairing Tara’s tooth cost $1,700. This time her loan statement looked pretty scary.



Establishment fee (20% of $1,700)


Fees (4% per month)


Total repayment


Monthly repayments (12 payments)



Tara’s first payday loan had worked out, but now she struggled to make these monthly payments on top of her existing commitments. She feared she would have to sell her prized car.

A better solution…

Her boyfriend, Lachlan, introduced her to his financial adviser who helped Tara establish a workable budget. It meant forgoing her weekly dinner with friends and shopping trips most Saturdays, but she could structure her accounts to gain greater financial control – eventually saving a small amount for emergencies.

As Tara learned from her adviser, there are alternatives for bridging the pay-to-pay gap. For example:

  • Many service providers – including dentists – offer interest-free payment schemes.
  • Utility companies provide payment plans for gas, electricity, etc.
  • Banks are more understanding than you think – really!
  • The No Interest Loans Scheme (NILS) offers safe, no interest loans assisting low-income earners to purchase essential goods or services. See nils.com.au for information.

It can be easy to fall into a cycle of spiraling debt. There are always alternatives so before taking what appears to be an easy option, seek professional advice focused on your individual circumstances.

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Authorised Credit Representative 383415 of IFBA Pty Ltd.  Australian Credit Licence Number 383415.
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