Personal Loans Australia :: Articles
SHARE

Share this article!

The Truth Behind Payday Loans

The Truth Behind Payday Loans

There’s a lot been said about payday loans.
Many claim that the interest rates charged are outrageous.
Others say that they are the only source of finance available for those with less than perfect credit score.
There is a bit of truth in both claims but there is much more to payday loans than meets the eyes.

A Simple Concept

When Pay Day Loans first appeared in the finance industry, they came to fill a gap not covered by any other financial product.

The original idea which remains in most of the loan products of this kind is to provide a small amount of money, usually up to half of the borrower’s wage for a short term (till pay day) at the end of which the money is reimbursed plus a fee or an amount of interests.

This was a simple and speedy way to solve a temporary lack of funds.

Traditional personal loans took too much time to be approved because there were too many credit examinations to be done.

The whole concept was extremely simple: A small amount, a short term, fast approval.

Debt Stressed?
If you're struggling to pay your debts and covering living expenses, we're here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

How do lenders get a return on such small amounts?

Even simpler, the interest rate charged is considerably higher. The high return in terms of percentages also came to justify the high risk involved in these transactions for the lender.

Since there are no credit checks whatsoever and the loan is unsecured, there is absolutely no guarantee that the borrower is going to return the money (other than his/her salary).

The Actual Situation

Problems began when the proliferation of this kind of loan drew so many unscrupulous lenders to this new market.

In order to attract new customers they began to offer longer repayment programs, loan renovations, interest reschedules, etc.

As with credit cards the flexibility offered by Pay Day Loan lenders began to create a vicious circle for many people that had no control over their finances.

Thus, they take a pay Pay Day Loan, fail to repay it on time and take another one in order to pay the previous one and so on.

Debt starts accumulating, interests increase and sooner or later a debt consolidation program is necessary or worst, they have to file for bankruptcy.

It’s as unfair to say that the whole responsibility belongs to the lenders as it is to say they have no responsibility at all.

The advertisements, the hidden loan terms concealed in the fine print of loan contracts too long for anyone in a desperate situation to read and the easiness with which some lenders extend loans for people they know can’t repay without making huge sacrifices has a lot to do with the bad reputation of Pay Day Loans.

Applying for a Pay Day Loan is not a sin

If an unexpected situation arises and you don’t have the money you need to solve it, nor you have the time to resort to other forms of finance and you know that you’ll be able to repay the loan without problems by next payday, it won’t kill you to request a Pay Day Loan.

What you need to understand is that they are meant for emergency situations and you must avoid taking it as a habit to request a Pay Day Loan every time you need extra cash for whatever reason.

Published:Tuesday, 24th Aug 2021
Author: 11

Share this article:

Need Money for a Bike?
We offer fast, free, easy access to the best Bike Loan rates and options in the Australian market. Simply use our 3-minute Bike Loan enquiry form to see if you qualify … and you'll get instant access to our national Bike Loan broker network … for free advice and assistance through the approval process. No charge, no obligation!
Insuring your most valuable asset
While many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.

Personal Loans Articles

Proven Strategies to Boost Your Personal Loan Approval Odds Proven Strategies to Boost Your Personal Loan Approval Odds
Embarking on the journey to secure a personal loan can often seem like navigating through a complex financial landscape. Particularly for Australians, where the market is bustling with a multitude of lenders each with their respective criteria and rates, increasing the chances of loan approval is a pursuit that requires insight and preparation. - read more
A Credit-Savvy Approach to Loan Comparison: What Every Australian Borrower Needs to Know A Credit-Savvy Approach to Loan Comparison: What Every Australian Borrower Needs to Know
Welcome to your essential guide on how to navigate the complex world of personal loans in Australia. Whether you're seeking to finance a major purchase, consolidate debt, or cover unexpected costs, understanding the nuts and bolts of personal loans is crucial. In this conversation, we'll shed light on why being credit-savvy is not just smart, but necessary for anyone considering a loan. - read more
Your Financial Comeback: Rebuilding Credit Scores for Future Opportunities Your Financial Comeback: Rebuilding Credit Scores for Future Opportunities
In the dynamic landscape of Australian finance, the emphasis on a robust credit score cannot be overstated. A favourable credit score serves as a gatekeeper to a world of financial opportunities, determining the ease with which individuals can access loans, the interest rates they will be eligible for, and even the prospects of securing a home in an ever-competitive market. As the average mortgage sizes surge to unparalleled heights, the significance of maintaining an advantageous credit profile escalates in tandem. - read more

Finance News

Inflation Outlook Brightens as Australia Braces for Key CPI Update Inflation Outlook Brightens as Australia Braces for Key CPI Update
22 Apr 2024: .Paige Estritori

A crucial announcement regarding consumer prices is forthcoming as the Reserve Bank of Australia (RBA) anxiously waits to steer its future monetary policy decisions. Analysts and economy watchers alike have their eyes locked onto the publication of first-quarter consumer price index (CPI) data from the Australian Bureau of Statistics, set to impact the nation's economic direction. - read more
Alarming Rise in Australian Student Loans Calls for Immediate Action Alarming Rise in Australian Student Loans Calls for Immediate Action
19 Apr 2024: .Paige Estritori

A fresh analysis has sparked concern over the surging levels of student debt in Australia, invigorating discussions for policy revisions in the impending national budget. Projections denote that during the initial tenure of the incumbent Labor administration, the cumulative student debt may swell by an extraordinary $12.3 billion, marking a 16% escalation. This upward trend raises alarms for prospective and current students grappling with the financial barriers of higher education, and ignites a dialogue on the urgency of governmental intervention. - read more
ANZ Bank Bids Farewell to Cheque Books Amid Digital Shift ANZ Bank Bids Farewell to Cheque Books Amid Digital Shift
19 Apr 2024: .Paige Estritori

The fintech landscape continues its relentless advance as ANZ, one of the leading banks in Australia, has declared a pivotal shift in its operations that will see the discontinuation of cheque book issuance. This calculated move aligns with broader trends in digital banking and paves the way for modern financial interactions among its clientele. - read more

Need Help Finding a Loan?
Find out now if you qualify and compare rates, offers and options from multiple lenders - without a credit check!
Loan Amount:
Postcode:
All finance quotes are provided free (via our secure server) and without obligation. We respect your privacy.

Knowledgebase
Mortgagor:
A person who offers to assign an asset as security (e.g. real estate) under a mortgage loan contract. The lender (mortgagee) holds the legal ownership of the security until the loan is repaid and the mortgage is discharged.