Payday Lenders Put On Notice
Should you be concerned if you have or are looking at getting a payday loan?
The short answer is that you really need to know what you are getting yourself into and need to take the time to consider all of your options before jumping into any short term payday loan arrangement.
Major lenders have been funding payday lenders for years, but times have recently changed and the conscience of the big banks have gotten the better of them. Major Banks have now made the decision to dump payday lenders to protect their own reputation given they have certain policies on corporate social responsibility and also due to the increased scrutiny of the payday sector from the corporate regulator ASIC.
Payday loan providers have been criticised for targeting the unemployed and also people in jobs who cannot afford to make ends meet. There have been scenarios where loans that are rolled over, or not paid back on time as set out in their schedule can sometimes carry annual interest rates that can be in excess of 300 per cent. Yep, that’s 300%.
Chief executive Adam Mooney, a former ANZ banker, welcomed Westpac’s decision to dump their relationship with payday lenders. We hear daily stories of people who have been caught in endless cycles of debt through very expensive forms of finance. It has an impact at a human level and an economic level,” Mr Mooney told the ABC. “This cycle of debt leads to additional anxiety, resources are held back within the family from food, education and health. At an economic level, it does lead to entrenched poverty.”
What effect does this have on local payday lenders? It will be business as usual, but they may now need to seek finance from overseas lenders or international debt markets to fund their payday businesses.
It really is a case of buyer beware at the moment when it comes to payday lending. In our business, Ask4Finance, we are seeing the major financiers now putting restrictions in place for applicants that have made a payday lender enquiry over the past 6 months. In most cases, these lenders will not give an approval to an applicant that has even just made an enquiry to a payday lender in the past 6 months, which means that you don’t even have to have taken the money, you only need to have made the enquiry with a payday lender online as this will show up on your credit file.
Payday lenders are now flooding the market with very clever marketing and advertising, especially on TV. They make it look very easy to get your hands on “cash” fast. Clever marketing strategies are being adopted to lure people into the quick easy cash funding platform which could have long lasting effects on a person’s credit file.
So before you jump into a payday loan, think of the long term consequences to your credit file and what effect this will have on your future capacity to borrow money at a reasonable interest rate.