Australians search for payday loans when cashflow breaks. The bigger story is what happens after the money lands. Recent regulator findings and credit bureau indicators suggest repayment stress is concentrating in higher value, unsecured credit, and that is forcing a reset in how fast credit is priced, assessed, and collected.
ASIC’s March 2025 review of small amount and medium amount credit contracts found a structural shift in the market, away from loans at $2,000 and under and toward contracts above that threshold. ASIC also observed a rise in missed repayments and default rates for medium amount credit contracts offered by current or previous small amount credit contract lenders, even as missed repayments fell for the smaller contracts.
At the same time, credit bureau reporting is flagging that delinquency risk is increasingly about value, not just volume. Equifax reported that in Q2 2025 the total dollar value of 90+ day delinquent accounts rose across multiple products, and for personal loans the number of accounts in arrears edged down while the limits in arrears increased by 22.2%, concentrating risk in higher balance accounts.
What The Latest Data Actually Shows
1. Payday Lending Is Shifting Upmarket
ASIC’s REP 805 describes a contraction in small amount credit contracts and an increase in medium amount credit contracts, based on data collected from December 2022 to August 2024.
The practical implication is that some borrowers who previously used payday loans for smaller amounts are now ending up in larger contracts, sometimes close to the $2,000 line but without the additional protections attached to small amount credit contracts.
- Missed Repayments Are Rising Where The Balances Are Bigger
ASIC’s report highlights “a significant spike” in missed repayments for medium amount credit contracts and notes that while the number of missed repayments later reduced, it remained well above the December 2022 level.
This matters because the headline “payday loans defaults” is no longer only about the classic under $2,000 product. It is about the broader ecosystem of fast, small unsecured credit that payday lenders and adjacent providers offer.
- Credit Bureau Signals Show Stress Concentrating In Higher Value Delinquencies
Equifax’s Q2 2025 commentary points to a clear theme: the total dollar value of late stage delinquencies is rising even where the rate of delinquent accounts is stable. For personal loans specifically, it notes an increase in limits in arrears by 22.2% at the 90 day level.
This type of pattern is consistent with “fewer, bigger problems”. That is exactly the environment where defaults can rise quickly once households run out of buffers.
illion’s March 2025 Consumer Stress Barometer adds another signal: it reported overall credit stress up 1%, personal loan consumer stress up 2.5%, and linked that to a 5% rise in personal loan arrears.
Why Defaults Are Rising In “Fast Credit”, Even If Payday Loans Are Capped
The fees on payday loans are capped, but the repayment problem is usually cashflow timing, not pricing alone.
MoneySmart says most payday lenders charge an establishment fee of 20% and a monthly fee of 4%, and it shows how quickly those fees add up, including a worked example where a $1,200 payday loan repaid over 1 year adds $816 in fees.
MoneySmart also states an important constraint that many borrowers do not realise until late: repayments must be no more than 10% of after tax income over the repayment period.
So what is driving the rise in missed repayments and defaults in the higher value contracts?
- Bigger balances meet fragile budgets. When more borrowers shift into $2,001 to $5,000 style contracts, the repayment impact per pay cycle is harder to absorb.
- Stress shows up first in unsecured credit. Credit bureau signals indicate delinquency risk building in higher value accounts in products like personal loans and BNPL, which often sit alongside payday loan use in household budgets.
- Collections are less forgiving in fast credit. Shorter repayment periods leave less room to recover from a missed pay cycle before arrears become persistent.
What Regulators Are Warning Lenders About
ASIC is not only reporting repayment outcomes. It is also warning about lender conduct.
In its March 2025 media release, ASIC said it was concerned some small and medium amount credit contract providers may be “falling short” by entering unsuitable contracts or failing to identify and distribute to an appropriate target market.
ASIC Commissioner Alan Kirkland put it plainly:
Consumers who access these products are often financially vulnerable.This is why “defaults rising” is not just a consumer story. It is a product governance story, especially as lenders move customers into different contracts and repayment structures.
What This Means For Borrowers Right Now
If you are considering payday loans, or you already have one, the most important shift is to treat repayment resilience as the main decision factor.
A Simple Pre Loan Checklist
- Use MoneySmart’s payday loan calculator to quantify the full cost and repayment schedule.
- Compare alternatives that reduce fee load, including No Interest Loans and Centrelink advance payments where eligible.
- If you are already missing payments, get help early through the National Debt Helpline on 1800 007 007, which MoneySmart lists as a free option.
Faster, Safer Alternatives That Still Solve Urgency
MoneySmart outlines No Interest Loans for essentials and explains that they have 0% interest and no fees, with borrowing up to $2,000 for essentials and up to $3,000 for bond and some housing related needs.
The Department of Social Services also positions no interest loans as part of financial resilience programs and describes them as an alternative to high risk products such as payday loans, including no interest loans up to $3,000 for eligible people on low incomes, repaid over up to 2 years.
What Lenders Are Likely To Change Next
In a market where missed repayments are rising in higher value contracts and credit bureau indicators show increasing stress, lenders will keep tightening risk controls. Expect to see:
- tighter suitability checks and clearer target markets in distribution
- repayment schedules designed to reduce failure points, including better alignment to pay cycles
- earlier intervention on missed payments, because defaults are increasingly concentrated in higher balance accounts
For borrowers, this should push you toward reputable lenders that are transparent about costs, repayments, and support options. A reputable lender such as CashPal should be evaluated on clarity, compliance discipline, and repayment management, not on marketing claims about speed alone.
Bottom Line
The data is pointing to a shift in fast credit risk: smaller payday loans are no longer the only centre of gravity. ASIC observed missed repayments and default rates rising in medium amount credit contracts offered by current or previous payday style lenders, and credit bureau signals show delinquency value rising in unsecured credit, especially in higher balance accounts.
If you are using payday loans, treat the decision as a repayment plan first and a cash solution second. Use the calculator, pressure test the repayments, and if you are already stretched, prioritise no interest alternatives and free financial counselling pathways.