History of Payday Loans In Australia
Payday lending has always been a controversial sector. Although some payday lenders perform some questionable practices, they only account for a few. There are still many reliable and trustworthy payday lenders that aim to help all those who are in need of cash.
Let us take a look back at the history of payday loans in Australia
20 years ago, payday loans aren’t as popular and common in Australia as it is today. This form of credit started to gain its momentum during the late 1990s when financial institutions like credit unions and banks reduced their short term lending offers. It kicked off the rapid expansion of small amount loans from lenders. Payday loans are almost always on top of the list when it comes to fast solution to urgent financial issues.
The sector has continued to boom since its inception back in the late 1990s. But the year 2014, the demand for short term loans have soared by twentyfold. For example, more than one million Australians took out payday loans in 2012, which generated interest rates and associated fees of up to $1 billion.
The rise can be attributed to several factors including difficulty to get a loan approval from traditional lenders, income inequality, and many more. Thanks to technological advancements, online lending was created and borrowers can now apply for a payday loan at the comfort of their homes.
Are payday loans safe?
As its name suggests, payday loans provide fast cash to borrowers who are facing short-term financial problems. Although short term loans gave consumers a way to access instant cash, it was also the reason why some found themselves deep into debt. There were instances when payday loans, which were meant to help borrowers pay unexpected costs, became too difficult to afford. This has caused borrowers to take out another payday loan to settle their first debt until it becomes a cycle.
Payday loans were meant to help people who are struggling financially. However, if the borrower takes out a payday loan out of impulse or just to cover the cost of something unimportant, then this form of credit could easily become a dangerous prospect.
Despite that, payday loans were designed to serve a purpose. It’s one of the most widely accessed form of credit because most borrowers of this loan don’t have access to bank or credit card loans. Not to mention, payday loans are the top choice of borrowers with a bad credit history.
The payday loan industry is growing rapidly and together with that is a growing concern that more Australians will end up trapped in a debt that they can’t get out of. To address these concerns, the government created a new law that started back in 2013. The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Enhancements Act) included restrictions and regulations on payday loans to make sure that consumers are protected. Some of the regulations include banning loans of more than $2,000 that should be settled within 15 days or less and borrowers of small amount loans should not be penalized with a fee that’s twice the amount of the loan.
Payday loans, such as you can find at Perfect Payday have its own set of pros and cons. But one thing is for sure, it will continue to be a significant part of the credit landscape in Australia.