The NAB warns of the dangers of payday loans as more Aussies turn to ‘quick-take’ loans to meet the rising cost of living.
A new NAB study released today finds that one in 10 Australians facing financial hardship have accessed a payday loan in the past three months.
Payday loans were the third most common type of debt used to manage financial difficulties in the third quarter, behind credit cards and borrowing from friends and family (used by one in three people).
As Christmas approaches, NAB Customer Vulnerability Manager Mike Chambers has warned against using payday loans to manage the extra expenses people may face.
“Christmas can be a financially stressful time for many people and in the face of financial stress it can be tempting to try and find a quick fix to manage costs,” Chambers said.
“Payday loans can seem like an attractive option, as they are often instant and have low credit checks in place, making them more accessible to people in dire straits.
“What people don’t realize is that there are often many hidden costs associated with loans, in addition to higher interest and late payment fees.”
According to information from NAB Q3, payday loans are the most stressful of all debts for Australians (with a score of 64.2 pts), ahead of loans from family and friends (57.3 pts), personal loans (51.9 pts) and home loans (51.7 pts) . On average, Australians owed $6,200 in payday loans over the past three months.
Mr Chambers said an interest-free loan, through organizations like Good Shepherd, was a more sustainable option for people who need to finance things like basic necessities, cars or commodities whites.
NAB provides capital for Good Shepherd interest-free loans and has supported over 68,000 low-income Australians with $47 million in loans over the past 12 months.
Mr Chambers recommended customers struggling with payday loans contact their bank.
“A call to your bank is the best first step to discuss the possibility of a loan payment break, a reduced payment plan, or access to an independent financial adviser,” Chambers said.
“Our NAB Assist team recently spoke with a client who had nine different payday loans and was struggling to keep up with debt repayments. We were able to tailor a solution and are confident we can help them pass to the other side.
“No matter how bad a situation may seem, there is help available that will put you in a stronger financial position in the long run.
“About 97% of clients who contact us early when facing financial hardship recover within 90 days.”
- Ask for help in case of financial difficulties by NAB-Assist.
- To access independent financial advisers, contact Debt Helpline on 1800 007 007 or moneysmart.gov.au.