Desperate Aussies turning to “payday” loans this Christmas
- Triple the number of Australians taking out “payday" loans in November compared to last year
- Australians borrow $667 million in short-term loans in past year
- Aussies urged to be careful and consider all their options rather than relying on short-term loans
December 9, 2015, Sydney, Australia – New research from one of Australia’s biggest comparison websites, finder.com.au, has revealed the number of desperate Australians turning to small amount credit contracts – commonly known as “payday loans” or "short-term loans" – has more than tripled in the past year, a serious concern with the biggest spending season of the year now upon us.
According to a comparison of payday loans on finder.com.au (finder.com.au/payday-loans), there was a 227 percent increase in the number of Australians searching and applying for payday loans in November 2015 compared to the same month the year prior.
It follows the first-ever release of small amount loan market data from the National Credit Providers Association, which shows providers lent $667 million to Australians over the past financial year.
Bessie Hassan, Consumer Advocate at finder.com.au, says the statistics are particularly alarming given the spending season ahead.
“Christmas is the most expensive time of year and this year is shaping up to be no exception, with Australians expected to spend $8.9 billion on gifts alone and rack up a record credit card bill of $28.5 billion. So it’s no surprise that more Australians are turning to short-term loans to get by.
“And it’s not necessarily the stereotypically unemployed, cash-strapped that are looking for quick-fix options, with almost 2 million Australians taking out these cash loans in the past two years. There were 1.3 million loans of which were taken out over the past year – 200,000 more than the previous year.
The report also found that the average small amount loan size was $502 and paid back in 117 days. According to finder.com.au, that means these borrowers are paying an average of about $180 to borrow $502 and pay it back in less than four months. That’s an annualised interest rate of about 112 percent.
Across the combined $667 million borrowed last year, that means Australians spent an estimated $239 million in fees for small amount loans.
“There are more cash loan lenders in the market than there used to be. And while regulations are tight, technology has allowed the industry to make it even more convenient and faster to get these loans. For instance, some lenders provide the loan on a debit card and almost instant access to the loan.
“In addition, we think many people struggle at this time of year and don’t plan ahead for the most expensive spending season. In fact, 57 percent of Australians aren’t planning a budget this Christmas, according to the annual creditcardfinder.com.au Christmas Shopping Survey.
“If you need to find credit this December, comparing your options is absolutely critical. Small amount loans, like any financial product, can be a positive strategic move provided it’s not a blind grab for cash.
“The silly season will be gone in the blink of an eye – unfortunately the same can’t be said for debt. Plan your Christmas spending properly; make your own budgeting list and check it twice,” says Mrs Hassan.
Note: A payday loan (or small amount loan) is a loan of up to $2,000 and repaid between 16 days and one year. Short term loans of less than $2,000 and repaid within 15 days were banned from March 1, 2013.
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is Australia's most visited comparison website and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares 250 credit and debit cards from 31 providers, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au to find better (Source: Google Analytics).