LOW-INCOME south-west residents have been warned to tread carefully before signing up to short-term loans at high interest, some allegedly at more than 600 per cent.
Two local community agencies have told The Standard they knew of residents being stung by what are known as pay-day lenders and left with debts higher than what they had originally.
In New South Wales a class action has been launched on behalf of up to 50,000 borrowers allegedly locked into huge interest rates varying between 145 per cent and 633 per cent, which breach consumer credit laws which cap rates at 48 per cent.
“We advise people to keep away from these type of lenders because of the high interest rates and seek sound advice,” said St Vincent de Paul Society western region president Jack Daffy, of Warrnambool.
“Some of them are short of cash, others are looking for short-term finance to buy necessary household equipment,” Mr Daffy said.
“People are lured by the promise of having up to $1000 in their bank within the hour.
“Unfortunately their money disappears in repayments, meaning they have less to purchase essentials.
“There are several agencies around that offer good financial advice and can steer applicants in the right direction.”
One agency is the No Interest scheme run by a committee of volunteers and a part-time administrator using funds from benevolent trusts.
“It’s Warrnambool’s best-kept secret,” said administrator and promotions officer Helen Polack, who works from the Brophy Family and Youth Services offices.
“We offer $1000 loans over 12 months at maximum repayments of $40 a fortnight.
“Demand has been increasing steadily as people find out about us.
“It usually takes a few weeks from start to finish for approvals for eligible applicants, but unfortunately some people don’t wait and go to short-term lenders.
“I recently heard of one man being charged 48 per cent interest on a $1000 loan — he’ll end up paying double.
“Then because he was making repayments they contacted him and asked if he wanted to take out another loan.”
Bethany Community Support chief executive Grant Boyd said the agency provided financial counselling for general issues and also for problem gamblers through a 1300 510 439 help line.
“We can also assist with negotiations with creditors and restructure of loans,” Mr Boyd said.
“I’d urge people to be very careful about taking out loans with high interest rates.”