Appetite for payday loans leaves Aussies facing financial hardship
NAB research has detailed one in 10 Australians are facing financial hardship having accessed a payday loan in the past three months.
This comes as Aussies are increasingly turning to credit to tackle high inflation and combat rising cost of living pressures.
Insights from NAB revealed payday loans were the third most common type of debt used to manage financial hardship in the September quarter, trailing credit cards and borrowing from friends and family.
Key Points
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One in 10 Aussies having accessed payday loans in the previous three months are now faced with financial hardship.
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Payday loans are the most stress-inducing debt according to NAB data.
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Over the past three months, average Aussie payday loan balance is $6,200.
Further, payday loans are considered the most stress-inducing at 64.2 points ahead of loans from family and friends at 57.3 points, personal loans at 51.9 points and home loans at 51.7 points.
For reference, NAB’s data details a score closer to 0 indicates lower financial stress.
In the lead up to Christmas, NAB Head of Customer Vulnerability Mike Chambers warned against the use of payday loans to manage the extra expenses people may be facing.
“Christmas can be a financially stressful time for many people and when faced with financial stress it can be tempting to try and find a quick fix to manage costs,” Mr Chambers said.
Data from Roy Morgan published last month, revealed Aussies are expected to continue to open their wallets, forecast to spend $63.9 billion in the pre-Christmas sales period from 14 November to 24 December.
Mr Chambers said payday loans can seem an attractive option, as they are often instant and have low credit controls in place, making them more accessible to people in desperate situations.
“What people don’t realise is there are often many hidden costs associated with the loans, on top of higher interest and late payment fees,” he said.
This warning comes despite NAB detailing Australians are owing on average $6,200 on payday loans in the last three months.
Further, NAB pushed ignition earlier this month on a new buy now, pay later product dubbed ‘NAB Now Pay Later’ to tap into the market amid the push for credit in the lead up to Christmas.
Zip co-founder and global chief operating officer Peter Gray recently told Savings.com.au he expects to see customers continue to turn to credit and credit cards in times of high inflation and increased cost of living.
“Those who utilise this form of credit and continue to extend their debt by only paying the minimum repayments, will continue to incur enormous interest bills, increasing the amount they owe, and the time required to pay it back,” Mr Gray said.
By Jacob Cocciolone
Originally published by Savings.com.au
