How many people paid 36% in fees to have a merry Christmas?

Elizabeth Barry 9 December 2015

Borrowers on the credit fringe: Number of Aussies applying for payday loans increased

Piggy Bank xmas lightsDoes it ever feel like Christmas comes earlier every year? For some, this sentiment yields more than just a mere nod of the head. Many Australians rely on credit to get through the holiday season – 36% of all 2015 Christmas shopping will be on credit, according to a recent survey.

But what if you were ineligible for standard personal loans or credit cards? This is the case for many Aussies who are on lower incomes, who have bad credit or who are receiving Centrelink benefits. For some of these borrowers, when it comes to getting through the silly season, some very serious decisions need to be made about how they're going to make ends meet.

How many people are applying for payday loans?

Small Amount Credit Contracts (SACCs) known commonly as payday loans, are an option for people on the "credit fringe". How many? According to recent data from, there has been a 227% increase in the amount of people searching and applying for payday loans in November 2015 compared to November last year. A total of 1.3 million loans were taken out over the past year, an increase of 200,000.

How much are the loans costing borrowers?

According to a release of short-term loan market data from the National Credit Providers Association, in the past year, Australians have borrowed $667 million in short-term loans. So, how much is it costing them to borrow? The Australian payday landscape is one of most regulated in the world. While it is still a costly form of credit, the cost of borrowing is fixed. For loans of less than $2,000 lenders cannot charge interest, and instead charge fixed fees that are expressed as a percentage. The fee structure is as follows:

  • Establishment fee: 20% of the principal loan amount
  • Monthly fee: 4% of the principal loan amount
  • Other fees: Default fees, late payment fees and Government fees and charges may also apply

What does the average loan look like?

The loan market data from the National Credit Providers Association revealed key insights into what an average payday loan looks like.

  • The amount. The average loan size was $502
  • The loan term. Borrowers repaid loans on average in 117 days
What does this mean? To borrow $502 for 117 days, borrowers are paying on average 36% in fees for their loans, or $180.

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