If you are struggling financially and are considering taking out a payday loan to help pay off some of your outstanding debt, you need to think again. Payday loans are one of the worst type of loan to obtain, mainly because they come with significant fees and associated cost, as well as, high interest rates. You will end up repaying much more money than you borrowed in the first place – much more!
In fact, a payday loan is likely to put your further behind financially, and since the money will be automatically deducted from your pay cheque, you will have no way to reverse the effects. It is very important that you understand that there are other alternatives that will help you avoid taking out a payday loan. If you are currently having trouble making ends meet, you may qualify for special governmental benefits. Below is a look at a range of loan and benefit options which should be considered before taking out a payday loan. Visit Low Income Loans Australia for a full list of alternative low income and welfare options.
Get the Benefits You Deserve
The first thing you need to do is contact the Centrelink office near your location immediately and ask them how to apply for benefits. You can also apply for benefits online. After your application is reviewed, the Centrelink office will explain the different type of benefits you are eligible for right now. You may be able to receive things like income support, rental assistance, funds to help pay for childcare, and other forms of financial assistance.
These payments are typically sent out on a monthly or fortnightly basis, and can be used to help offset some of your current expenses. While this may not pay your outstanding debt immediately, it will give you some leverage to talk to your lenders and make affordable payment arrangements. Most lenders will be willing to work with you and are likely to accept payment terms you can afford. These benefits can also help you save money so you can afford some of the other things you need.
Instead of taking out a payday loan, you should first explore your other loan alternatives. The government offers several loan alternatives to low-income families. Below are the top three loan alternatives that come with little or no interests or fees.
- Centrelink Advance Payment. If you are eligible for payments from Centrelink, you may qualify to receive an advance payment to help cover some of your outstanding bills, or to make a necessary purchase. Once the loan is in place, Centrelink will take a small amount out of your monthly payment to put towards your advance until it is paid back in full. There is no interest or fees associated with these advance payments.
- NILS Loan. The NILS loan, also known as the No-Interest Loan Scheme, will allow you to borrow up to $1,200. You will be required to slowly pay the loan back over the next 12 to 18 months, but there are no fees or interest charged for this type of loan.
- StepUp Loan. If you are not eligible for the NILS loan or need more money, you may qualify for the StepUp loan. This is a loan program that allows you to borrow between $800 and $3,000. You will be charged a low interest rate, but it will be a lot better than the rates offered by payday loans, and you have up to three years to repay the loan.
Set Up a Savings Account
While an emergency savings account may not be able to help you out of your current situation, it can help to prevent the need to borrow money in the future. There are also some matching savings accounts available where the government will match the amount of money you are able to save, up to a set amount. Below are the two top savings plans that can help you set up an emergency fund.
- AddsUp Savings Account. Once you have successfully paid off your NILS loan or your StepUp loan, you can set up a special AddsUp savings account. You can save this money for anything you want, and the government will match your savings dollar-for-dollar up to the maximum of $500.
- Saver Plus Account. The Saver Plus account is very similar to the AddsUp account, except it is available to all low-income families. Once you have consistently made deposits into your savings account for 10 consecutive months, your funds will be matched, up to $500.
It is important that you look into all your options before you even consider taking out a loan. It is very likely that with the help of the various benefits listed above that you can get your finances straightened out before obtaining a high-interest loan. If you do decide to take out a loan, be sure to read all of the fine print in the terms and conditions of any loan before making your final decision.