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More Aussies Getting 'Payday Loans' Due To Running Out Of Money Before Next Pay

New figures show more debt-stressed home owners and renters are turning to "payday loans" from non-bank lenders.

Since April 2016, three million additional payday loans totalling $1.85 billion have been written by about 1.6 million Australian households, according to numbers crunched by Digital Finance Analytics (DFA).

"Alternative lenders are anyone who is not a bank and payday loans fall under this. These are short term loans of up to $2000 and they have very high interest rates and other fees," Martin North of DFA told 10 daily.

North says Australians are 20 times more likely to default on a payday loan than a home loan. Some lenders promise to transfer the money within 30 minutes, at an interest rate of 20 percent plus extra fees.

These cash loan kiosks, which look like ATMs can be found in low socio-economic areas on the outskirts of Sydney, in Wollongong and on the Central Coast.

He says short- to medium-term credit of up to $5000 and car loans are easier to access than ever before.  It comes as banks pull back on lending in the wake of the Banking Royal Commission.

"These sorts of lenders have been growing over the past three or four years, but the real spike has been in the past two years due to the massive reach of the internet and dedicated apps," North said.

In addition, money lending kiosks can be found in low-socioeconomic areas, sparking fears they are targeting vulnerable people and luring more families into a debt trap.

"They are strategically placed in areas where locals may have less of an understanding of household finance options," he said.

SOURCE: Digital Finance Analytics

Single-mums are most at risk, according to Reserve Bank of Australia data analysed by DFA.

"Within the women segment we see a large number of one-parent women accessing payday loans, representing 40 percent of women. This is in stark contrast to males where just 6 per cent are one-parent families," North said.

Melbourne freelancer Todd, 32, told 10 daily his experience with payday loans was a bad one.

"I couldn't be assured when my next pay cheque was coming through, so I got a payday loan to help pay for rent and bills," he said.

I ended up paying close to triple the amount of the original loan and fees due to having to defer a few times, he said.

Todd says it's "very easy to get into a debit spiral", especially if you don't  have a consistent source of income.

An example of one of many payday loan providers online. IMAGE: supplied

"They knew that would be an issue [for me]  but still were happy to provide a loan. Anytime there was a potential missed payment however they would call incessantly," he said.

The government introduced legislation in 2017 that would bring in stricter payday loan protections, but it hasn't progressed. The Coalition suggested it would wait until after the banking royal commission  was completed to deal with the issue.

Todd claimed the process of getting a payday loan was very quick and, to his knowledge, a credit check wasn't necessary.

"The money was in my account later that day, so a very quick process," he said.

"The repayment fees are exorbitant, and any missed payments make an already astronomical amount to pay back all the more unmanageable."

READ MORE: "Serious Failure": Ombudsman To Investigate Robo-debt Scandal 

“The statistics around the increased prevalence and use of payday loans are alarming," Laura Bianchi, head of Redfern Legal Centre’s credit and debt practice said.

She says community legal centres regularly hear from people who cannot maintain the repayments and end up in "out of control debt" because of payday loans.

“Payday loan kiosks and online applications are particularly dangerous because they can appeal to people caught in desperate situations who need money fast," she told 10 daily.

North says it's time for the government, to act before more harm is done.

"We are seeing this sort of debt creating decay in the heart of households, and our governments need to be doing something about this and now," North said.

Contact the author alattouf@networkten.com.au