The number of Australians relying on short-term “payday” loans has more than tripled in the past 12 months, says finder.com.au.
The study noted that there was a 227% increase in the number of Australians looking and applying for short-term loans in November 2015 compared to the same time period last year.
The findings corroborate with short-term loan market data from the National Credit Providers Association, which shows that lenders provided $667 million to borrowers over the past financial year. Given this data, this meant Australians spent approximately $239 million in interest for short-term loans.
Consumer advocate for finder.com.au Bessie Hassan said that the data is worrying, especially with the biggest spending season of the year looming just 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,” she said.
Hassan detailed that there were almost 2 million Australians that took out short-term loans in the past two years, hinting that it is not just the unemployed looking for a quick fix for their income that are doing the borrowing.
She also shared that there were 1.3 million loans taken out over the past year, which was 200,000 more than the previous year.
Finder.com.au’s report also discovered that the average short-term loan size was $502 and paid back in 117 days. This meant that borrowers were paying an average of around $180 for a $502 loan, and had to pay it back in less than four months.
While short-term loans have become much more convenient to take out in recent time due to technology, Hassan urged consumers to be judicious with their spending and borrowing, and consider planning a budget to avoid crushing debt later on.
“If you need to find credit this December, comparing your options is absolutely critical. Short-term loans, like any financial product, can be a positive strategic move provided it’s not a blind grab for cash,” she said.
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