I am sure you have seen the ads on TV: having problems with paying your gas bill/phone bill/car repairs/nursery for your new baby? “Why don’t you Nimble it?” says the guy dressed in a rabbit suit. Nimble call themselves “smart little loans” but in reality there is nothing smart about them, as behind the humor and quirky advertising, lurks the most insidious form of lending the ‘payday loan’.
But what is a ‘payday loan’? Typically a payday loan is for a small amount of money, usually less than $2,000 and which is lent for only a short period of time. Traditionally it was until your next payday and hence the name. The other trademark of a ‘payday loan’ is the extra ordinate interest and fees interest they charge. In Australia, fees are regulated at 20% of the value of the loan and a maximum interest rate of 4% per month. Yes, you are right 4% per month is 48% per year! So if you borrow a $1000 over 6 weeks it will cost you $1,280 in interest and fees!!! And that is just for 6 weeks!!! Worse, in the case of Nimble if you miss a repayment they will spank you with $35 fee and $7 a day until you have cleared the debt. Yep, they don’t tell you all of that in the cutesy hipster advertising. Now you understand why it is so easy to get yourself into trouble using this form of lending.
To help you get trapped in a cycle of debt Nimble will even put your hugely expensive loan directly onto a Nimble prepaid visa card for you – just to make sure it is even easier to spend! And to apply for these incredibly expensive loans all you need is the Nimble app on your mobile phone or internet access on your home computer.
And this is what makes me fear for our children. You see the clever, soft, hipster advertising isn’t aimed at me, a 40 something mother, it is aimed at young people who are unaware of the danger that this type of lending represents. Combined with easy access over the internet or an app on your phone, these types of loans have become far easier to access and more socially acceptable than ever before. That has got to scare any parent. No-one wants to see their son or daughter trapped in a debilitating cycle of debt, taking out loans to repay loans, where the horrendous interest costs and fees cripple any chance to clear the debt.
So what are the alternatives to a payday loan?
- Ask yourself the question “Do you really need it?????” Are you absolutely sure you cannot do without it? Are there other ways to achieve the same goal?
- If you need the money to pay a bill as the adverts suggest, make sure you negotiate with the supplier first. All utilities, whether you are talking about your telephone, electricity, water or gas bills have hardship programs you can utilise to get the bill paid without incurring more debt.
- If you are on low income and qualify, you could take out a No Interest Loan (NILS). If you are interested in finding out more please click here.
- If you are on Centrelink, see if you can receive an advance.
- Talk to your family and friends and see if they can help you. Usually I don’t believe in mixing family and money but when it comes to payday lending it is a far better alternative than paying extortionate rates of interest and fees.
It is important to know that Nimble and MoneyMe are not the only guises of the payday lending blight in Australia. Cash Converters, Cash Train and Cash Stop are all payday lenders and so is pretty much anyone else who offers easy short term loans, hipster advertising or not.
So as your child approaches adulthood make sure you talk to them about payday loans and all their different guises. Tell them about all the things that the snazzy advertising and bouncy jingles forget to mention like the high fees and huge interest rates these loans attract and how easy it is to slip into a cycle of debt. If they don’t believe you, as most teenagers don’t, tell them to check out this youtube video from “Last Week Tonight with John Oliver”, it is a comedic view of the horrors the payday lending industry have unleashed on the US. It is exceptionally well done and well worth a watch for both parents and children (though the language gets a bit colorful at the end!).
I know that when my daughter is old enough, she will be watching it and I will be telling her all about how payday lending works. It is only through knowledge and education that we can protect our kids from this insidious form of lending.
p.s If you have a problem with payday lending a Financial Counsellors can help you, call 1800 007 007 Australia wide to hook up with one in your area. Their service is completely free.
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The information contained in this post is general in nature and does not constitute financial advice. Please see your financial advisor for advice specific to your individual circumstances.