Locals loaded with big loans

FINANCIAL experts are concerned at the rate at which locals are taking out “predatory” loan and credit services, after it was revealed Toowoomba has some of the highest levels of “buy now, pay later” debt in the state.

New data from Digital Finance Analytics showed the average balance of Darling Downs households who used retail credit services like Afterpay or ZipPay was $3500 in December, well above the Queensland and national average of about $2750.

Residents’ average debt levels for retail services, payday loans and other unsecured loans only increased between January and December last year.

University of Southern Queensland’s Associate Professor of Law Toni Brackin, who specialises in financial literacy, said she was concerned but not surprised by the new statistics.

“We should certainly be concerned about increases in household debt as it can lead to financial vulnerability and eventually financial distress,” she said.

“The most concerning trends are the increase in the average payday lending balance per household as well as Buy Now Pay Later balances.”

Lifeline Darling Downs financial counsellor Donna Neale-Arnold is now fully booked up with clients, while the team has a long wait list of people in desperate need of support.

She said residents had moved away from traditional credit cards in favour of payday loans and BNPL services like Afterpay, which often had fewer restrictions to get accepted.

“They’re not a bad alternative to credit cards as long as people take out one at a time, but so few do that,” she said.

“They are absolutely predatory — because it’s so easy (to apply), it’s replacing credit cards and people don’t understand that interest is like a fee.”

Fortress Financial Solutions director Chris Black said payday and BNPL loans were targeted at people who often lacked the financial literacy to understand what they were signing up for.

“I think it attracts and is targeted to people from low socio-economic backgrounds, who don’t have an ability to meet the conditions and it could send them into a debt spiral,” he said.

“They’re marketing it to these people, and that’s how those companies make their money — the people with money don’t need this product.”