The face of finance is changing. Online lending is on the rise. Short-term, small-amount loans, known as ‘payday loans’ or ‘small-amount credit contracts,’ are booming as more and more Australian families reach out for financial assistance.
Why is payday lending growing so rapidly? Are small-amount credit contracts worth getting into?
Recent research reveals that more than 30% of Australian households are now classed as financially stressed, and in a five-year space, the number of households using payday loans has increased by more than 50%.
Alarmingly, the report also showed that the number of borrowers taking out more than one loan in a 12 month space more than doubled from 2005 to 2015. The number of borrowers with more than one loan at a time more than tripled in the same time, despite recent regulations to prevent simultaneous loans. One in five payday borrowers were in arrears or default.
As a finance option, payday lending is hard to regulate and has a poor record in customer protection. Good Shepherd Microfinance warns, “Our microfinance workers see the harm caused by payday loans and consumer leases every day – they’ve been seeing it for years.”
So how can you avoid the need to take out a payday loan? Here are some tips to get you started.
Budgeting helps you know where your money is going and find ways to manage your income better.
Set aside money for upcoming bills or special events so that you’re prepared.
Remember, a small-amount credit contract is just that: a small amount. Small but patient savings can become the buffer you need to stay out of debt in a tight situation.
Do you really need it? Do you need it now? Can you find it on sale somewhere or sometime else?
When choosing your bank account or other financial services, find a competitive low- or no-fee option, or one that offers good interest.
Talk to the experts
You don’t have to manage your finances alone. Whether you’re trying to keep on top of the bills or looking to purchase another investment property, a finance professional can help.
Do you want to know more about staying out of debt and managing your finances? Talk to our experienced professionals now and explore your options.