A consumer advocate group has called for greater awareness of the risks associated with payday lending.
In light of the Federal Government’s upcoming regulatory review of payday lenders, consumer advocate group Credit Savvy says more needs to be done in raising awareness about the potential negative impact on the future financial health of Australian borrowers.
Managing director of Credit Savvy, Dirk Hofman says Australian consumers are too easily tempted by the promise of easy money from payday lenders, without realising that this could have long term negative consequences on their credit worthiness and financial wellbeing.
“Household debt is at record levels, and more than half of Australians were found to experience a cash shortfall between their paydays last year, so payday loans are dressed up in friendly packaging to look like a convenient solution,” he said.
“However, our research suggests that Australian consumers really need to watch out for the high fees associated with these loans.”
According to Credit Savvy, if a consumer borrows $1,000 from a payday lender, they will owe the lender $1,240 in a month’s time – that is $240 in fees and interest charges after a single month.
However, when using a $1,000 personal overdraft which can be as cheap as $12 in fees and interest charges after one month, a consumer could save up to $228 compared to a payday loan.
Another alternative to a payday loan is a credit card cash advance. Drawing a $1,000 cash advance can cost as little as $28 after one month.
