About Australia Payday Lending
Payday lending in Australia is quite popular, but it faces the same type of scrutiny as similar practices do in other countries. Despite the controversy, this is an industry that continues to grow with new names jumping into the payday lending business each week. This article provides some general information about payday loans in Australia and discusses some of the controversy surrounding such loans.
All Australia payday lending activities are regulated by the Consumer Credit Code. While these regulations are intended to provide some measure of protection to borrowers, the interest rates and fees are still quite high.
The exact percentage that a consumer would pay per loan depends on both the company from which they borrow and the local laws that are in effect where the lender is located. Some payday lenders do try to keep their rates competitive but to others, it seems, the sky is the limit. Rates for payday loans in Australia range from 26% to over 1300%.
Those wishing to take a payday loan in Australia have the option of doing so online or in one of the many brick and mortar locations throughout the country.
How it Works
Those wishing to take out a payday loan in Australia should do a little homework prior to choosing a lender. The terms, including interest rates, qualifying criteria and the length of time allowed to pay back the loan, vary between lenders. Shopping around could save you money and, in some cases, help you qualify for a slightly larger loan.
Payday lenders offer loans of between $100 and $600. How much one will be able to borrow depends on their income, how often they are paid and whether or not they have borrowed with a particular lender in the past.
Typically, first time borrowers are allowed a smaller amount than those who have a bit of a history with the lender. If a borrower is paid only once a month, they will be allowed to borrow a larger amount than someone who is paid weekly or every other week.
If you choose a lender online, you will simply fill out an application and upon approval, the money could be deposited directly into your bank account in a matter of hours. If you choose a storefront lender, you may be able to choose between being given a check or having the money directly deposited within a day.
The most common way to pay back a payday loan in Australia is through direct debits. Upon applying for the loan, you agree to allow the lender to debit your bank account for payments for the loan. Usually, the loan will have to be paid in full within one to two pay periods.
Depending on your pay cycle, some lenders will break the payments into two payments, while others prefer one lump sum payment.
If you are able to pay the loan back early, you may save money on the interest rate and some of the fees. However, each company varies in how they handle early repayment, so be sure that you fully understand all of the fine print on your loan documents before agreeing to the loan.
Once the loan has been paid back, you will be eligible to take another payday loan. Usually, you will be able to borrow a larger amount once you have successfully paid back your first loan.
How Payday Loans May be Helpful
For unexpected situations, such as a car that breaks down, a payday loan can be quite helpful. This type of loan should only be used to assist in dealing with short term financial situations. Because of the very high fees and interest rates, they should not be used for help with longer term financial problems.
Criticisms
As mentioned above, some are critical of payday loans. They say that this type of lending causes those who are already in financial trouble to get even deeper in the hole. Payday lending opponents feel that borrowers should be limited in the number of loans that they are allowed to take each year and that the interest rates should by much more strictly limited.
Others, however, feel that this gives an option to those who may have no other choice for financial emergencies.
Both sides of the debate continue to lobby, some for stricter laws and some for more lax control of payday lending.
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