The vast majority of people taking out small short-term loans are on Centrelink benefits and fewer than half say the loans improve their financial situation in the longer term.
More than half a million Australians use pay-day loans, so named because the loan is made on the security of the borrower’s next pay cheque. At least $500 million is lent a year, most in amounts of $1000 or less and with very high interest rates.
The Caught Short report examined three years of Australia’s burgeoning pay-day lending industry, with funding from the Australian Research Council, National Australia Bank and Good Shepherd Youth & Family Service.
It found almost 80 per cent of those using pay-day loans were on Centrelink or pension payments, and more than 80 per cent of those were living with significant physical or mental health problems. Only 20 per cent of borrowers considered themselves better off after taking out pay-day loans; half said they were worse off — via redwolf.newsvine.com