Has everyone seen the ad on TV for pay day loans? You know the ones I am talking about that offer quick cash. It’s a fun ad that usually involves someone accidentally smashing a TV or a kid damaging something in the house and the mum asking “where will we get the money to fix this?”
Unfortunately a lot of aussies do live week to week and are unprepared for a large unexpected expense. Think car repair, medical bill, oven dying etc. On these Tv adds, Pay day lenders make out like they are the security net that will catch you when you fall. What they don’t mention on the adds is the interest rates for these loans. Just out of curiosity, I had a quick look on some of the pay day lender websites and it was so shocking to see the interest rates.
For a loan of $2000-$5000 it will cost you $400 establishment and then an interest rate of 47%. Yes that is not a typo, I said 47%. Now you might think on a small loan that would not equate to much interest. WRONG, on a $5000 loan over 12 months that would mean you would be paying $2350 in interest alone. Even if it only took you six months to pay it off, that would still be $1175 plus your original $5000. What is even scarier is that on one of the sites it said 1215 people had applied for a loan in the past 24 hours.
It is easy to see how desperate people can fall into this debt wheel and it is hard to get off. If you have no emergency savings and no where else to turn in a money related crisis a pay day loan can be the last resort. Digital platforms are making these loans more accessible than ever and getting the money into your account can happen on the same day you apply. Some of these companies also have Blogs offering finance tips and budget advice. WTF? This sends quite a confusing message considering the interest rates we just established are in no way conducive to a good financial decision.
The amount of women accessing these types of loans has increased as well from 177,000 in 2016 to 287,000 in 2019. According to one report Victoria recorded 275,624 new payday loans between January and July 2019 — the most of any state or territory. New South Wales was second with 254,242 new loans in 2019.
If you are experiencing financial hardship there are avenues for support. The National Debt Helpline is a free service that can help you sort out your finances if you are struggling with debt. They can even provide you with a free financial counsellor. The first steps to becoming financially secure is to pay off your bad debt and save that emergency fund so that this cycle can be broken.
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