Payday loans in Australia top $667 million
Number of Aussies taking short-term loans has tripled.
Australians took out $667 million in payday loans in 2015, and the number of people searching for those loans has tripled, suggesting a rapidly growing demand for loans which don't require a solid credit history.
According to the National Credit Providers Association (NCPA), there were 1.3 million short-term borrowers approved over the last year. The number of people searching for short-term loans on finder.com.au was up 227% in November 2015 compared to the same time last year.
The average loan is for $502 and takes 117 days to repay, the NCPA found. That slow repayment suggests the loans are being taken out by people on low incomes.
Payday loans are often the only alternative for people with poor credit histories, but typically attract much higher fees and charges than secured personal loans. The NCPA estimates that 3 million Australians aren't able to apply for more conventional secured loans, making payday loans their only realistic option.
While the fees are high, there are constraints on how much payday lenders can ask customers to cough up. Regulations restrict the fees payday lenders can charge in Australia. Lenders can charge up to 20% of the loan value as an establishment fee, and then 4% per month as an account-keeping fee. On the typical $502 loan paid off over four months, the likely total interest is $180.