I’m sure many of us have been in a situation where we wish we had a little more money to tide us over until our wages or salary goes into our account. Maybe your washing machine or fridge stops working or some other unexpected expenses come along. Some things just aren’t planned or budgeted for.
Some people in this situation turn to what are known as “payday lenders” – businesses that loan relatively small amounts of money for a short term, usually with high fees and interest rates. In fact, when some of the fees and penalties are taken into account, interest rates can sometimes top 1,000%.
Payday loans were originally designed to provide short loans for a few days (literally until the next payday) but most of these debts are carried for weeks or months. The lenders may not require the same proof of income as ‘traditional’ lenders like credit unions. Some prey on the fact that their borrowers need cash quickly and will accept huge penalties, or simply don’t understand the contract.
Media reports suggest that payday lenders are causing people to forfeit household goods such as beds and washing machines because they are unable to meet the extraordinary payments.
So what do you do if the car does need work or your fridge stops working? One option is approaching not for profit groups, who can often provide short-term loans with low (or even no) interest and fees (or if you’re a student then speak to your uni’s student association or union about options for short term loans – they’re usually happy to help out with rent, bills or books).
If you’re not studying, then there is a range of charities that provide emergency loans. It’s hard to ask for help but I’d encourage you to – you might feel embarrassed but it’s better than the payday lending alternative.
Savings & Loans is currently funding a pilot program with the Salvation Army, that is offering emergency interest-free loans if people agree to financial counselling and budgeting sessions. The program’s run through the Salvation Army, so doesn’t impact our operations or lending obligations.
And as the wider economic climate changes, more people may be tempted by the lure of payday lenders to pay loan or credit card arrangements. Don’t do it.
Savings & Loans – like all Australian credit unions, building societies and banks – is committed to helping our members if they’re having financial problems. Rather than borrowing money to meet existing commitments, call us and discuss your situation. If you lose your job or have your working hours cut, then visit a branch or call our Member Contact Centre.
We’ll talk over your situation and look at how we can work together to help you get back on top. Everyone’s situation is different and our staff will develop a plan to get you back on your feet.
Brent Hill, Senior Manager Corporate Social Responsibility
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