While personal credit, according to the RBA is not rising, as shown from their credit aggregates – to August 2017 – we see a more disturbing trend.
One of the less obvious impacts of flat incomes, rising costs and big mortgages or rents is that more households are under financial pressure, and so choose to turn to various unsecured lenders to tide them through.
Many of these are online lenders, offering instant loans, and confidential settlements. Re-borrowing rates are high, once they are on the hook inside the lenders “portal”.
In our household surveys we asked whether households were likely to seek unsecured credit to assist in managing their finances. Here are the results by state to September 2017. More than 1.4 million of the 9 million households in Australia are in this state (and it is rising fast). Not all will get a loan.
Households in NSW and WA are most likely to seek out other forms of credit. These loans, could be from SACC (Pay Day) lenders, or other sources; but are not reported at all in the official figures.
We think more than $1 billion in loans are out there, and our research shows that such short term loans really do not solve household financial issues. However, when people are desperate, they will tend to grasp at any straw in the wind, regardless of cost or consequences. We also find these households within certain household segments, who tend to be less affluent, and less well educated.
We also think more robust official reporting would help shine a light on the sector, and separate the sheep from the goats!
