Harmful debts
Payday loans and rent-to-buy
We see the harm these financial products cause people. That’s why we call them ‘dud debts’. And we know that there are better options.
Alternatives
Contact a local charity or emergency relief provider to get help with urgent needs
Lay-buy it and pay the item off over time
Wait and save up for the item
Look at a no-interest loan (NILS) or a low-interest loan
Chat to the person/company you owe money to, and work out a repayment plan
If on Centrelink, see if you can get an advance
See if a friend or family member can help out
Contact Moneycare
Pass by Payday Loans
Stay away from so-called 'payday loans' - they're high-cost small loans of up to $2,000 often marketed to people already finding themselves in a tricky situation, offering a 'quick fix' of fast cash with fewer checks. While easy to get, they are harder to escape, often leaving people in a cycle of debt with equivalent interest rates sometimes as high as 400% and a range of fees and charges.
Run from Rent-to-buy
Stay clear of Rent-to-buy. It’s an expensive way to buy basic household items. The ads make it look simple, but in the long run, you’ll pay a lot more for your household goods. If you ‘rent to buy’, you are actually borrowing money. The equivalent interest rate could be over 100%. And you’ll still have to make repayments if the item is broken or stolen.
Before getting one of these products...
Stop. Think. Act with care.
We don’t make the best choices when we’re rushed and under stress. Do not sign unless you know the answer to these questions:
- How much will I have to pay back?
- What happens if I miss a payment?
- What are the extra fees and charges?
- How much will I have to pay at the end of the contract to own the item (for rent-to-buy items)?
Case study:
Josie and Joe were stressed because they needed to replace their fridge, computer and TV.
Growing tired of waiting to be able to afford them, they signed up for 3 rent-to-buy products.
The total spend each week was $70 per week or $3,640 per year for 3 years. They felt more stressed trying to come up with this cash each week.
Joe lost his job.
They couldn’t get out of their rent-to-buy contracts and negotiated to return the goods after paying over $7,000.
If Josie and Joe had saved $70 per week, they could have bought each item in one year.
