Consumer credit options grow in Australia

Australian payday lending sector could be worth $2bn, according to report

The payday loan industry in Australia is growing rapidly with new companies springing up across the country that are home-grown as well as foreign branches of US companies heading to the island’s shores. Recent statistics from the Government of South Australia highlighted in a research paper found that the payday loan industry in Australia could be worth as much as $2bn annually. This sharp demand for consumer credit has changed how people apply for credit, with companies such as Cash Store Australia dotted around the country ready to dispense quick loans.

Reasons why the lending industry is growing in Australia

One reason why payday lending has risen in popularity in Australia is because the market is relatively untapped. Australian consumers need alternative forms of credit especially as an alternative to traditional banking. Payday loan lenders have made it easy for people to apply for temporary credit that they can pay back once they are paid.

If banks in Sydney or Melbourne will not lend to certain consumers, without payday loans, they would have to resort to loan sharking which is illegal lending. Loan sharking is illegal in Australia and in other parts of the world, which leaves an important gap for ethical consumer credit companies to help people gain temporary access to cash.

Australia’s diverse population features people from a wide variety of backgrounds. A study found that New Zealanders feature heavily in the number of people who apply for short term credit. Diversity in population of Australia points to different economic needs and this is something payday lenders know that they can fulfil.

Popular lending products in Australia

There are several types of alternative credit options for Australian customers who want to access credit without having to go to a bank. Some of the choices gaining popularity back home include:

• Cheque cashing: Much like the cheque cashing shops you see in the UK, the ones in Australia allow you to advance your pay from your cheque and you pay a small fee. Cheque cashing is typically used to handle unforeseen financial expenses such as a higher utility bill or a family emergency that needs to be paid before payday.
• Bad credit rating loans: Depending on which lender people send their applications to, the Australian loan market does have lenders that will accept applicants who have low credit ratings.

The growth of this niche lending market has led some consumer advocates to question whether ‘capping’ it is the right thing to do in response to consumer complaints about debt spirals. Queensland has successfully capped cash loans to 48 per cent and advocates are trying to get other parts of the country to do the same. Lobbyists maintain this would put credit companies out of business. As the payday loan industry blossoms back home, consumer credit becomes complex with plenty of players hoping to capture the interest of Australian consumers.