A third of Australians can’t come up with even 500 dollars to cover an emergency. Life gets in the way sometimes. Your car may break down, and you must fix it to get to work. Maybe your relationship ends, and you need to find a new place to live and fast. No matter what, people need to have access to low or no interest funds to get through life’s rough patches.
If you don’t have savings or access to credit, what happens? Many Australians think that getting a payday loan is the quickest, easiest, and most affordable option for accessing spare cash for an emergency. But payday loans are not a good idea and can keep someone trapped in a cycle of poverty and debt. That’s the last thing you need if you can’t even cover $500 in an emergency.
What is a payday loan?
Payday loans are a major player in the small loans market, but they’ve recently come under fire for predatory lending practices, charging exorbitant interest rates, and using bait and switch marketing tactics. Unfortunately, payday loan lenders tend to target the most vulnerable in society. When someone is desperate for cash, it’s much easier to get them to agree to loan terms that aren’t in their best interest.
Payday loans are a short-term borrowing method where a payday lender extends a high-interest loan to someone based on their income and credit profile. Usually, the principal of the loan is a part of the borrower’s paycheque. Sometimes, a payday loan is called a cash advance or cheque advance loan. Payday loans are infamous for charging insane interest rates, sometimes as high as 35% of far more. These types of short-term, high-interest loans are also known to hit borrowers with hidden fees and other surcharges. On the extreme end of payday loan lenders, some will charge an APR of 500%.
Why are payday loans bad ideas?
Getting a payday loan is a bad idea for several reasons. For one thing, the interest rate on a payday loan is one of the highest you can be charged in the small loans industry. The terms of the loan are also limited to 30 days. It’s unfortunately all too easy for borrowers to become trapped in a cycle of debt to the payday lender. Another pitfall with payday loans is that they do affect the borrower’s credit. A payday loan default can start a cascade of financial issues, including bank overdraft fees, collection calls, and wage garnishments.
What are some viable alternatives for meeting cash shortfalls?
In need of quick cash? There are many alternatives to meeting a financial emergency that doesn’t involve usurious interest rates and potential harm to your credit report. Visiting a pawn shop can get you an instant cash loan with interest rates that are much lower than a payday loan. Credit checks aren’t performed with a pawn loan in Sydney or Melbourne Pawnshops, and if you default on the pawn loan, your credit is not affected. If you have any gold, silver, or diamond jewelry, you can easily convert precious metals and gems to quick cash at either a pawn shop or a gold buyers store.
If you’re thinking of a payday loan, please reconsider. Sydney Pawn Shop, Melbourne Pawn Shop, and Southern Cross Gold Buyers in Adelaide are much easier and cheaper alternatives to get the cash you need in an emergency.
