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New research from comparison website finder.com.au has revealed an alarming number of desperate Australians turning to short-term loans.
According to a finder.com.au, there was a 227 percent increase in the number of Australians searching and applying for short-term loans in November 2015 compared to the same month the year prior.
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It follows the first-ever release of short-term loan market data from the National Credit Providers Association, which shows providers lent $667 million to Australians over the past financial year.
Bessie Hassan, consumer advocate at finder.com.au, said the statistics are particularly alarming given the spending season ahead.
“Christmas is the most expensive time of year and this year is shaping up to be no exception, with Australians expected to spend $8.9 billion on gifts alone and rack up a record credit card bill of $28.5 billion,” Ms Hassan said. “So it’s no surprise that more Australians are turning to short-term loans to get by.”
Ms Hassan said it is not necessarily the stereotypically unemployed or cash-strapped who are looking for quick-fix options, with almost two million Australians taking out short-term loans in the past two years.
The report also found that the average short-term loan size was $502 and paid back in 117 days. According to finder.com.au, that means these borrowers are paying an average of $180 to borrow $502 and pay it back in less than four months – an annualised interest rate of about 112 percent.
“Across the combined $667 million borrowed last year, that means Australians spent an estimated $239 million in interest for short-term loans,” Ms Hassan said.
“There are more short-term lenders in the market than there used to be. And while regulations are tight, technology has allowed the industry to make it even more convenient and faster to get these loans.”
Ms Hassan said some lenders provide the loan on a debit card and almost instant access to the loan.
“In addition, we think many people struggle at this time of year and don’t plan ahead for the most expensive spending season,” she said.
[Related: Tread carefully with some credit providers]
