Payday lenders target those who need fast cash by providing high-cost short-term cash loans.
If you’ve ever seen an ad for “speedy cash” or “money in minutes” you’re dealing with a payday loan. Despite their sky-high rates and bad press, payday loans are still as popular as ever. In fact, new research from Digital Finance Analytics has found that one in five households in Australia has used payday loans over the past three years.
Once you scratch the surface of these ‘quick-fix’ cash arrangements you’ll reveal their huge fees and massive interest rates. In fact, while researching payday loans for this post we came across one company charging a staggering 162.5% interest with a $400 establishment fee!
So why are these loans so popular? Unexpected bills, increased living expenses, over-spending, and a lack of financial understanding often sees individuals turning to these sorts of lenders, who offer “fast” and “easy” cash up to $5000.
Alternatives to payday loans:
Speak with your providers and creditors: If you’re struggling to pay an electricity, gas or water bill, it is best to contact your utility provider. These companies will have someone available to help you work out a payment plan.
Likewise, if you can’t keep up with your existing loan repayments speak with your creditors. All financial institutions are required by law to assist you if you can’t meet your repayments due to financial hardship.
Speak with Centrelink: If you’re currently receiving Centrelink benefits, you could be eligible for an advance payment on your benefit - to learn more, head to the Department of Human Services website.
Review your budget: Using payday loans for everyday expenses is less than ideal because it means that your income isn’t supporting your living expenses. Review your budget to see where there are unnecessary expenses that you could cut back on to make room for everyday costs. Creating a budget is also a great way to review all of your expenses and make a plan to save for them- especially for those bills which seem to sneak up on you!
Speak with a financial counsellor: If you’re really struggling to keep up with repayments on your debts, it’s a good idea to speak with a financial counsellor. The National Debt Helpline is a free hotline that will assess your situation and provide you with advice to help you move on.
For more tools and tips to help get your finances back on track, check out our MOVE Bank blog.
This blog post is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651