Aussie battlers rely on quick cash
THE nation's poorest people are being forced to use high interest, short-term loans to pay rent and feed their families, a three-year study into "pay day loans" revealed on Monday.
More than 100 people in Queensland, northern New South Wales and Victoria were interviewed about their cash borrowing practices and living costs by researchers from several universities.
The report, Caught Short, included input from borrowers as well as people running non-bank cash loan businesses, such as Cash Fast and Lightning Loans.
About 80% of respondents were on Centrelink payments or pensions, with more than half saying they were forced to take out more than 10 loans up to $500 in the past two years to meet everyday expenses.
Among those high frequency borrowers, three quarters were forced to take out more than 20 loans in the past two years, as part of a vicious cycle of debt.
RMIT University lead researcher Dr Marcus Banks said the report found poverty was the driving force behind people seeking out payday loans and the loans actually entrenched poverty for those forced to seek financial help.
"Eight in 10 respondents also said their current financial circumstances were no better than before taking out high-cost, short-term loans, with most saying they were in a worse financial position," he said.
A majority of respondents (54%) borrowed amounts of less than $300 from payday lenders, while 21% borrowed between $301 and $500.
More women, at 58%, than men used payday lenders, while 37% of those using payday loans and receiving Centrelink payments were disability support pensioners.
More than four of every five Centrelink payment recipients reported "significant physical, psychological or emotional health problems".
Top seven reasons for taking out pay day loans
- "Couldn't make ends meet"
- Power, water or phone bills
- For or due to gambling
- Regular children's expenses
Source: Caught Short report; RMIT, UQ, QUT, NAB, Good Shepherd Youth and Family Service.