If you’re thinking about applying for a short-term loan one of your main concerns is going to be the cost. We’re going to break down those costs so you can decide if these loans will work with your budget. Short-term loans are one of the most **strictly regulated loans** available and because of this lenders are restricted as to how much they can charge. The credit regulator ASIC has made it so that lenders offering loans of less than $2,000 with terms of between 16 days and 1 year can only charge fees and not interest rates. That’s right; these loans actually come with no interest. The reason people think that interest is charged on short-term loans is that the fees are expressed as percentages. So let’s look at these fees.

1. The first fee that you need to consider is the *establishment fee*. Lenders cannot charge you more than 20% of what you borrow for this fee.

2. The second main fee you need to consider is the monthly fee. Lenders are not allowed to charge more than 4% of this fee. Remember these restrictions only apply to loans of less than $2,000 with the terms of between 16 days and 1 year. If you’re borrowing more, then different restrictions will apply. Now you know how much you can be charged, let’s look at an example.

Let’s say I take out a loan of $500 with terms of 62 days, which is a pretty standard loan term offered by short-term lenders. In total, I will repay $660. This includes my original loan amount of $500, my establishment fee which equals $100 and three monthly fees of $20 each. So now you know how many short-term lenders are able to charge and how to work out how much you will pay when you take out one of these loans. Remember though that not every lender will charge you the maximum allowable fees, so compare your options before you apply.