Payday lenders – good or bad?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

Fact checked

At Savvy, we are committed to providing accurate information. Our content undergoes a rigorous process of fact-checking before it is published. Learn more about our editorial policy.

For those unfamiliar with the term, a payday loan is a short-term loan, or a loan offered until you get paid, hence the name “payday” loan. For a lot of people, it seems like a concept that can save one from a desperate situation, but is that true? Is there more to it than meets the eye? Are payday lenders good or bad and should you take money from them? Let’s look at the facts.


Payday loans are a very appealing concept because they come in at a time when you really need the money – and fast. Unless you’re fabulously wealthy, you’ve most likely been in this position before. So, what are the benefits of doing business with payday lenders?

The application can be made online

When time is of the essence, you need to apply fast. That’s why applying online can be a literal life-saver. It’s quick, easy and efficient. Day or night, you can apply and get your answer – instantly.

The money is sent to you at once

Perhaps the biggest advantage is the fact that the money is sent to you instantly. When you need cash as soon as possible, this is a feature people tend to appreciate. Practically, as soon as you are approved, you get your money.


Not everything is rainbows and sunshine, and payday loans can turn from “life-saver” into “huge mistake” really fast. There are certain things you need to know before making the decision to take out a payday loan.

You can end up with extra fees

Ideally, you should never take out a loan, unless you are absolutely sure that you will be able to pay it back on time, in the full amount necessary. Otherwise, you can end up with additional fees that will add up to a number you didn’t foresee when you took the money.

Interest rates are very high

The number one downside of taking money from payday lenders is the fact that the interest rates are sky high. Sure, they help you out in an emergency, but that convenience comes at a cost, and it is a high one. Whatever amount you take, be prepared to pay a lot more back.

Your credit rating may suffer

Any company that offers loans of any kind is going to work with a credit rating agency, including payday lenders. This means that not only will they use your credit rating to make the decision of whether or not to give you the money, but if you fail to pay the money on time or at all, that will affect your credit rating. You may have difficulties getting a loan in the future, so be careful. All in all, payday lenders can save you from a desperate situation when you need money on the spot and the process of applying for a loan and getting the money is definitely convenient. However, you must also be aware of the trappings of a payday loan, including the high-interest rates, possible extra fees and the way it may affect your credit score.

Compare personal loans today

We’re here to help you find the most affordable options, so there’s no better way to compare personal loans and rates than right here, all in one place.