What is a Pay Day Loan
A ‘pay day loan’, or short term loan is a short term, high interest rate loan, varying from $300 to $2000. These loans are generally approved very quickly by vendors, without proper checks put in place. These loans
Characteristics of a No Interest Loan
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Borrow up to $1500
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No interest rate meaning you only pay what you take out
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Repaid over 12 to 18 months
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Centrelink recipients eligible
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Managed by Good Shepard Microfinance
Characteristics of a Payday Loan
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Borrow up to $2000
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High interest rate (20% of the original loan plus 4% per month)
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Applicants with bad credit are often accepted
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Centrelink recipients are often accepted (dependent on the lender)
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Excessive fees and charges (late fees, default fees)
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Short return period (from 16 days to one year)
Characteristics of a Low Interest Loan
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Borrow up to $2000
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Low interest rates (10% of the original loan + 2% per month)
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Applicants are credit checked
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Repaid over 12 months
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Managed by Good Shepard Microfinance
Case Study
“Greg” was a victim of the 2017 Queensland Floods. After losing all of his possessions in the floods, “Greg” decided to leave Queensland and move to the Shoalhaven. In order to do this, they applied for a small short-term cash loan to cover their travel cost. Despite being unemployed, the lender approved “Greg” for the loan.
Upon arriving in the Shoalhaven, the subject was unable to gain employment in the Shoalhaven. This meant that the high interest loan repayments left “Greg” without enough money to meet basic living needs. “Greg” had made the decision to stop making repayments and eventually the debt was passed to a collection agency, which lead to a continuous harassment of “Greg”. To end this harassment, “Greg” applied for another short term loan to pay off the debt. Again, the loan was issued, and although “Greg” was able to pay off the initial debt, the extremely high interest rate on the second loan left “Greg” in a more complex debt.
*Names have been changed to protect the identity of vicitm