Angelo Risso, AAP, Yahoo News
Australians are warned they risk being trapped in debt as they flock to the short-term relief of payday loans in record numbers, with applicants jumping by over 200 per cent this year.
As households look for a Christmas cash injection, the consumer advocacy website finder.com.au found Australians took out 227 per cent more loans in November 2015 compared to the same month last year.
Higher living costs, easy loan access, ubiquitous advertising and a boom in lenders were all partly to blame, according to finder.com.au advocate Bessie Hassan.
She said over half of Australians were not adequately budgeting for the festive season.
“Many people are expected to turn to short-term loans as their only option because of the convenience and quick turnaround time to access cash quickly,” said Ms Hassan.
But the finder.com.au website found borrowers paid an annualised interest rate of 112 per cent on average.
Principal solicitor for the Financial Rights Legal Centre, Alex Kelly, said she found the statistics a “frightening” prospect.
“Particularly on low incomes, you can end up in a debt trap you can’t get out of, because you can’t get out of the previous loan without getting a new one,” Ms Kelly said.
“It really isn’t a good decision to take out such short-term loans on such high interest for utility bills or presents.”
The average payday loan was $502.
“Borrowers are paying an average of about $180 to borrow $502 and pay it back in less than four months,” Ms Hassan said.
The findings follow a National Credit Providers Association report stating almost two million Australians have applied for payday loans since 2014.
This included 1.3 million loans in the 2014-15 period alone, an increase of 200,000 on the year prior.
Ms Hassan said $667 million was borrowed in payday loans with $239 million spent in interest on top.
She encouraged Australians to consider all alternatives before resorting to a payday loan.
“It’s certainly concerning to see so many Australians relying on these loans to get by as they are expensive and should be used as a last resort,” she said.
Read article here: Payday loans skyrocket in 2015