They promise easy cash loans fast, but the service of pay-day lenders is too good to be true, according to Australia’s money experts. They claim these organisations are preying on Australia’s most vulnerable and decimating their finances.
It’s a stance Daniel Bailey agrees with. He signed up for a payday loan when he lost his job at Christmas. He told news.com.au it’s a decision he deeply regrets.
“You get to a point where you’re close to the end and then you get an e-mail with an offer saying they can refinance you, so maybe it’s a $1000 or $800 coming your way,” he explained. “And you need it, you take it. It’s a week’s break from all the garbage. It becomes like a vicious cycle.”
At one point, Mr Bailey had five different pay-day loans, totalling $20,000, and weekly payments of $600. The loans have trashed his credit score and left Mr Bailey feeling bankruptcy is his only option.
Mr Bailey’s situation is all-too common, according to Gerard Brody, the chief executive of the Consumer Action Law Centre. He encouraged consumers to think of the long-term implications of payday loans, like how they’ll manage interest repayments of up to 400 percent, rather than getting out of an immediate financial jam. He says the exorbitant interest rates often see people who intended to use a payday loan for an isolated purchase becoming regular customers.
“While it might have been an initial need to begin with related to maybe a car repair or some appliance purchase or they’ve gone on a trip with friends, the reliance becomes on managing the everyday like paying the bills, paying for food, paying for rent,” he explained. “And if you’re borrowing for those purposes, then you’re quickly going to be falling into further financial difficulty.”
Mr Brody admits that payday lenders can be difficult to spot, as their websites typically don’t use the term “payday loans” or cite their interest rates. However, if you are promised fast money with an easy application process, it’s probably a payday loan. These lenders tend to use terms like “emergency loans” and “personal finance loans” on their website. Other terms which appeal to our wants and needs, like “medical bill loans,” “travel loans,” “debt consolidation loans,” and “car loans” are also common.
If you find yourself in financial hardship, a payday loan isn’t the answer, as it’s likely to make your money troubles worse. Instead Mr Brody encourages Australians to seek help from a financial counsellor.
At Chase Edwards, we have several services that can help Australians who have used payday loan services and those considering them. We can help you repay your debts faster than you imagined, establish a workable budget, and build an emergency savings fund so you can afford life’s unpredictable events. Schedule your free financial health check with us on 1300 854 833 to learn more about how we can help you.