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The major bank has warned consumers about the potential risks with payday loans as Australians gear up for the holiday season.
New NAB research has found that one in 10 Australians who have faced financial hardship have accessed a payday loan in the past three months, leading to payday loan debts becoming the third most common type of debt in Q3 behind credit cards and borrowing from family and friends.
Australians on average owed $6,200 on payday loans in the last three months, according to the major bank’s Q3 insights, and were revealed to be the most stress-inducing of all debt, scoring 64.2 points followed by loans from friends and family (57.3 points), personal loans (51.9 points), and home loans (51.7 points).
NAB head of customer vulnerability, Mike Chambers, warned against the use of payday loans to deal with rising cost of living during the holiday season.
“Christmas can be a financially stressful time for many people and when faced with financial stress it can be tempting to try and find a quick fix to manage costs,” Mr Chambers stated.
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“Payday loans can seem an attractive option, as they are often instant and have low credit controls in place, making them more accessible to people in desperate situations.”
Mr Chambers added that there are often many hidden costs associated with payday loans on top of higher interest and late payment fees.
He added that customers besieged by payday loan debts should contact their bank fo help.
“A call to your bank is the best first step to discuss the possibility of a loan payment pause, reduced payment plan or access to an independent financial counsellor,” Mr Chambers said.
Mr Chambers further recommended organisations such as Good Shepherd, which offer no-interest loans, as a more suitable option for people in need of emergency essentials, cars, or white goods.
The major bank entered a partnership with Good Shepherd, an organisation dedicated to helping young women and families in financial need.
Reportedly, over 40,000 low-income earning Australians have been provided with no-interest loans since January 2022, with the major bank stating that a “record” $27 million was provided to Australians.
The partnership’s purpose was to help low-income earners purchase basics such as home appliances, help with medical bills, and assist with buying cars or computers, with customers only needing to pay back the loan in small, regular payments.
[RELATED: 40,000 Aussies helped by no-interest loans: NAB]
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