Loans too good to be true
Loan sharking may have been outlawed, but predatory lending continues to lurk in the murky depths of our society.
Like wolves in sheep’s clothing, aggressive lenders offering payday loans bait victims with quick cash before consuming them with exorbitant interest rates and fees.
It’s hard to watch television or scroll through Facebook without copping a barrage of quirky advertisements offering quick cash with little, or no, questions asked.
Who can forget the helpful rabbit from Nimble offering ‘‘smart little loans?’’
He lulls people into a false sense of security, assuring them ‘‘just Nimble it’’ is the magic phrase to soothe their financial woes.
A payday loan (also called a small amount loan, cash loan or quick loan) is a high-cost shortterm loan.
Payday loans include small amount loans (loans of as much as $2000 that must be repaid between 16 days and one year) as well as loans borrowed over longer periods.
It’s a booming industry in our country and all over the world — especially the United Kingdom and United States.
Under the current regulations, lenders offering loans of $2000 or less can charge a maximum of 20 per cent of the borrowed amount as a one-off establishment fee, plus a monthly accountkeeping fee of four per cent of the principal.
For example, a Nimble representative confirmed borrowing the maximum ‘‘small loan’’ amount of $2000 from Nimble during a 12-month loan period would cost you $1360 in fees and interest — bringing your original $2000 loan to a total repayment of $3360.
You’ve effectively paid a whopping 68 per cent interest for a 12-month loan — at a time when the Reserve Bank of Australia official cash rate is at 1.5 per cent.
And that’s assuming everything is rosy and nothing goes wrong, should the borrower run into more money trouble and fall behind — that’s when the cute Nimble bunny rabbit digs his claws in even further.
If you’re any more than three business days late on any one of your monthly payments, you will be slugged with a $15 dishonour fee.
And if you must extend your loan because of additional financial difficulties — you will be stung with a $5 daily default fee for every additional day.
This is where the payday loan problem is rooted; companies such as Nimble are purporting to solve a problem while they’re potentially creating a bigger one.
Why budget and ensure you have enough money to last the week when the Nimble rabbit has your back?
These companies are encouraging fiscal irresponsibility by offering a get-out-of-jail-free card and then making it too big a hurdle for too many using it.
A growing number of people are becoming trapped in a payday loan cycle as fees and interest repayments spiral out of control.
With the money commonly taken straight from people’s bank accounts through direct debit, payday lenders have easy access to the pay cheques of their customers.
Using clever advertising targeted at the vulnerable, the likes of Nimble continue to fleece desperate people of financial freedom.
More needs to be done to educate our society, especially young people, about the dangers of predatory lending and what can be done to avoid or escape the vicious cycle.
These lenders don’t have to break your legs a-la their loansharking forefathers — they can sit in their plush offices and legally break your spirit.