Payday loans up as Australians pushed into risky credit from non-bank lenders - Sensationalist Headlines

Debt-stressed home owners and renters are increasingly turning to alternative lenders offering so-called "payday" loans and consumer leases, as falling property prices plunge more households into negative equity and banks crack down on credit. A combination of cost of living pressures outstripping CPI, stagnant wages growth and rising levels of mortgage stress is being blamed for putting immense pressure on homeowners, with Australia's household debt to disposable income levels hitting record highs. After increased scrutiny and accusations of irresponsible lending were levelled by the Hayne Royal Commission, banks have pulled back on new finance and tightened credit — something experts said was having the unintended consequences of pushing households into often riskier forms of credit offered by non-bank lenders. Short- to medium-term credit of up to $5,000 and car loans can be easily accessed through online platforms and mobile phone applications, with providers promoting same-day loan approvals. Experts said it was a dangerous situation for people struggling with financial problems. "The online tool, the app, that's a really important part of the story because a few years ago there was almost nobody offering apps for credit," Digital Finance Analytics data scientist and banking analyst Martin North said. "These days, a lot of people can actually get credit online, and once you've got into the online environment you've then got much more flexibility to flog other products, often without much visibility." https://www.abc.net.au/news/2019-02-21/payday-loans-increase-as-households-pushed-into-risky-credit/10827342 So an example of this would be my own situation. I’m a university graduate in a full-time job, I’m an accountant by profession so you would think that I know how to do a personal budget, I have never missed a rent payment or bill in my 6 years as a renter, and I have a substantial savings buffer for if I ever lost my job. I was curious to see what’s my own bank would offer me, but my bank’s finance calculator refuses to consider me for even a mere $1,000 secured personal loan, despite the fact that I could definitely afford the repayments for up to a $50,000 secured loan. Now that’s just based on an online calculator and not actual financial advice, but compare that to non-bank lenders that offer ‘guaranteed finance, even if you’re on welfare’, and you can see why it’s an unintended consequence of the banking royal commission; people with no financial responsibility being directed to dodgy finance.

Huge issue with car finance in the UK too, allota people predicting a bubble. There was a stat that came out relatively recently saying 82% of new car purchases in the UK are PCP, which is insanity. They have huge interest rates and people are buying cars they simply couldn't afford, and it becomes a one-up game with everybody around you about who has the shiniest. Then there's credit card debt, which is a whole different story. For the majority, people just need to stop buying stuff they can't afford just because it seems affordable when you slap a monthly payment on it. There's really no excuse. Mortgages is a whole different story obviously.

I know a few people that had amassed £15,000+ of debt (mostly CCs) by the time they hit age 20. Thing is, as long as they can keep up their minimum payments, nothing immediately bad is gonna happen. They seem happier amassing more and not thinking about it though than trying to pay it down so those payments will probably catch up to them.

Imo Finance companies and banks (especially after the 70s) have worked hard to "normalise" this personal debt culture.

When people say the credit card companies are taking advantage of those people, or there should be limits. I kind of understand. But at a certain point you can't keep blaming your inability to have self control with your finances on somebody else. Even if it is easy to blame a big monolithic corporation. Credit is really useful for alot of people, and building a history is important but at this rate I think the age to take credit should be higher.

Ah, I see you guys are finally catching up with the American way.

Payday Loans are fucked up. My family has one floating above our heads right now and just I really want the fucking thing dead.

Yeah, payday loans are very rarely a good idea, though I of course understand where one might consider it necessary. Just remember that loans will be hung over you for ages; the whole system & process is designed to exploit the vulnerable, and they're damn good at it.

This. A thousand times this. I work in a credit union here in the US. I have a coworker looking to get a new vehicle after her's was declared a lemon (for a faulty Bluetooth connection, lmao). She asked me my opinion on what kind of vehicle to get and how much to spend. I drive an 01 Civic I bought outright for $2000 and have since dumped $1500 into. I'm $4500 into a working, reliable car that sure isn't pretty but has gotten me where I need to go for over a year. I told her to look around and find something Japanese for around 5k-10k used. She thought I was crazy and that any vehicle so "cheap" is guaranteed to break immediately and require massive repair bills. She is looking at 18-25k brand new vehicles to avoid these repairs. This is while she's about to get a home and is working at $13/hr with 0 savings. How can people think that amassing massive amounts of debt with no backup money smart? She thinks its normal and ok to put yourself in a financial situation like that. This isn't a "I can make those payments for a year" thing. Its "can you make a $300+ payment every month for 6 years?" thing. Absolute insanity. My heart goes out to the under educated and indoctrinated folks who think these decisions are wise.

The worst part about buying cars new is that the car loses like 10% of its value after just a month of use. It's absolutely crazy. I got a used car from 07 a few years back with well over 100k miles on it and it's been performing well (knock on wood) with some expected expenses every so often. Still far cheaper than buying a new one.

These loans are massive debt traps and I can't believe they're still legal in the civilized world. Typically they start out reasonable, and after you repay your $600 loan you think you're free. Except that $600 was a "maintenance fee". Meanwhile its been racking up interest, you incur late penalties and you still have to payback the loan while also continueing to pay the loan maintenance fee.