Short Term Loans To Fill In Income Gap

Many families are struggling to make ends meet paying the rising costs of gas, electricity, water and food. Most households are getting by with payday loans to pay for their utility bills. Clearly, the disposable income of family is no longer able to sustain the regular expenses. Payday lenders are making good business as small loans applications soared. Households are becoming so desperate with living costs rising and yet the income remains the same. There are hardly no options left so customers have to manage the repayment charges of as much as 900 for small loans by some opportunistic lenders.

There are approximately 380,000 Australians and as many as 100,000 Victorians now rely on short term loans to pay their basic bills including utilities, rent, mortgages, car registration as well as repairs. In fact, the industry has grown by 10-fold in the last ten years and is believed to take a similar path like in the case of the United States. In the US, lending stores have outnumbered McDonalds and Starbucks, which only shows how cash-strapped people are.

Consumer advocates are quick to voice out their complaints regarding some lenders who are exploiting pensioners and the working poor by imposing high fees. These fees will subject borrowers from heavy debt and will only survive by repeated borrowing and more loans to pay previous debts. Payday loans are now estimated to be more than $200 million a year, which are borrowed as short term loans with high cost contracts. In Australia, the outlets have ballooned to 800 from a mere 80. Some sectors are becoming alarmed with the rapid growth of the industry.

The cost of these loans is high as compared to the standard rate, but the living costs are just too much for people to handle. Payday loans are the only available options to fill in the gap that regular income fails to cover. It is therefore recommended that a repayment cap with nationwide application be implemented following a review conducted by the Federal Government on credit laws.

In Victoria, a 48% cap on interest rate is imposed on payday loans without including fees and charges. The only places with comprehensive restrictions are Queensland, NSW and the ACT. Some providers were quick to claim that they have been following new and more responsible lending laws. Moreover, they claim that they are not taking advantage of the situation and exploiting the disadvantage. In fact, cash advance loans are also catering to the professionals including doctors as well as lawyers.

By placing a blanket cap on the interest rates and fees, providers may not be able to offer credit to consumers since the administration costs are also high. This will further burden the household as they struggle to get by with a soaring cost of living expenses. Payday loans are usually from $200 to $500, which should be repaid within two to four weeks. Once you convert into annual percentage the fees and interest, the charges can be as much as 900%. Borrowers can establish direct debits where repayments are pretty straightforward since it can be deducted from their accounts on pay day or pension day.