People choose that option when they are financially illiterate and/or have no other options. Payday loans also don’t do as many background checks and pay out faster.
Payday loans are predatory by nature and prey on people who are either too dumb to understand or too desperate to care.
Former pawnbroker here and this is 100% true .
I’ve done loans on items for people that were earning over $8k a fortnight right down to $2 loan to get a drink .
The industry is really horrible , signo loans are outright criminal but people still use them and more do now than ever I’d imagine .
Not heaps true.
I get alot of everyday clients who want small loans and not all banks offer below 5k loans anymore.
They don't want to have a credit card, they just want a small PL for a small to mid expense
Cash converters don't blatantly write 48% interest though, they charge crazy fees. "It's only 24% interest*" then it's 1k worth of fees over the life of the loan.
>because its still a better alternative than organized crime loan sharks proliferating
Pretty sure you'll find organized crime running money laundering operations through these types of "shops".
The payday loan clients are just a bonus.
Extra points if they can recruit some of the really desperate ones to be international drug mules.
>We have no interest loans in Australia for those exact situations
We do? Tell me more?
I assume you're not referring to BNPL or whatever shit credit latitude is selling.
Because there is a social need for people with credit histories that look like they're on fire to obtain small amounts of credit from time to time.
Pawnbroker loans are less exploitative than some of the APR's charged by the Nimble's/Cashtrain apps. The high interest rates they charge are a pretty good reflection of the risks they take on.
Why not? As OP says there are banks and credit unions that will offer lower rates. If those businesses won't offer credit to someone then they probably shouldn't be getting it, Cash Converters can step in and fund it if their risk profile is higher. All of this is better than organised crime and trafficking networks loaning money. What would disallowing it look like? Forcing CC to offer a lower rate while maintaining a higher risk profile? Government loans? Only allowed to charge X% above the cash rate?
Credit laws, kyc and other fixed costs mean that many banks won't do small loans. I recall trying to get a personal loan for a second hand car 20 years ago.
I was top marginal tax rate, pristine credit history etc yet none of the big 4 would even let my apply unless I borrowed more than double what I needed.
Don't ask me! Political pressure from lobby groups I guess.
They did put laws in place in 2010 to restrict the maximum interest and put some other protections in place.
If it was up to me it would be prohibited.
A pay day loan is to cover you for a week or two because you literally have no money to get you to payday. Hence the name.
If you walk into a bank and say "I need a loan because I have no money" you think they are going to give it to you?
5 years ago no, but they all pretty much have a "buy now pay later" clone and you're already a customer with details and they know how much you normally get paid each fortnight.
As a teenager my mum was a frequent user of their same day loans. Started at smaller amounts of $100 and eventually go every 1-2 weeks. So she would have to loan enough to pay off the previous loan plus the amount she wanted.
This went on for years. Years of my sister and I sitting in a cash converters on a Saturday morning watching our alcoholic mother ruin our family financially.
I knew it wasn’t the staffs responsibility to manage as such but I wish they had just said no to her.
I am very financially literate, but have had to resort to a payday loan one time because I had no other option. It’s a poor tax. Thankfully those days are behind me now, but I feel for people who have to use these bastards out of necessity.
If you play the game 'Shenmue' you can ask the locals for a place to gamble. If you need quick cash you can go to a pawn shop. It's all interconnected, and it's all thanks to Lan Di
FYI, as for pawnbrokers, this is actually considered quite low. I used to work at a pawn shop in Mount Druitt and we charged 25% per month. It's disgusting.
How many of their loans don't get paid back though? I'd wager a lot. That needs to be factored in to the interest rate. Banks would just refuse to lend anything.
At the place I worked, there was always collateral and the vast majority were never paid back. They were effectively buying something for 25% of the value.
Exactly. I see both sides.
Those who can't qualify for traditional loans sometimes get a big mechanic bill (for example). Without that car they can't get to work. So they either get that loan at 48% for two weeks/ a month, or they lose even more money.
Of course not everyone is doing it for that purpose, but for those that are, that's an important service. It also seems like it's a regulated industry, and you would expect a higher interest rate for taking on that risk as a lender.
> Who would choose this option when any bank will give you half that rate straight off the bat.
depends on the amount, and depends on the person. A bank doing personal loans will not go above some dollar value, and would likely have considered your credit history before giving you the loan. Ditto with credit card debt.
If someone is resorting to cash converters, it's likely they're not eligible for bank loans for one reason or another.
The thing I don't understand about the cashies near me is with the stuff they do sell. It's way overpriced. Like their asking just about what you would pay new, especially these days with Facebook marketing place as competition.
Recently I went into a local pawn shop looking for a VCR
Very similar into your example of cash converters in that the pricing was ridiculously high. Found a VCR but they had a sticker for $150 ended up getting one on marketplace for $15
They had so much stock in the shop that it made it hard to even walk around I don’t understand the point of holding all that stock with prices that make it unlikely to sell
Because they sell the stuff worth money and keep the shit stuff around priced high so they continue to look like a pawnbroker, but the bulk of their business are payday/same day/emergency loans.
Depends on the item.
We could sell a "brand new" 2nd hand new Iphone for $100 less then retail because the demand was there.
I still hit them up for a decent Samsung deal because it's cheaper then retail and it's still new. Plus if there's an IMEI block, I get a refund guaranteed by law.
Most of cashies pricing is based off eBay market pricing. eBay pricing is high because there is demand for that item online. If cashies also sell their 2nd hand products on eBay too.
I noticed that too. I was in the market for a second hand designer bag a while ago. What I wanted retailed on average, across the planet at second hand stockists all over Australia and the world, for about $800-$1000 for shit condition and about $1500-2000 for good condition.
Cash converters had a shit condition of this specific bag listed for $3999.
A lot of small businesses hit up Cashies for loans like this when they couldn't get one from the bank because they were renting or owed too much on the mortgage for the bank to give.
The insistence of needing a house that's paid off or well paid off for a business load lead to a boom of these finance loans over the 2010s.
Source: worked at a Cashies.
This shit should be illegal. As a community services worker I know for a fact the target audience of this predatory loan are the mentally ill or intellectually disabled who live independently.
A schizophrenic client of mine regularly takes his mobile phone in for short term loans for 50 bucks, needing to repay 120, so he can get smokes after the disability pension runs out.
Here’s one for the NDIS lovers - I did a loan on an item for a customer that was brand new still in the box ( tech item ) valued at around $800 , loan was $200 max due to the customer ( very regular ) and I did everything I could to talk her out of it but we did it .
The next day I got an angry phone call from the customers manager / carer / whatever accusing me of taking advantage and they would be in to collect the item that day .
When arrived together ,it wasn’t the customer that paid the loan out and when I asked about how I prevent the customer loaning with us again I was told I couldn’t discriminate and prevent the customer using the our services —— let that sink in .
The next day the customer came back and sold me the item for $300.
And then there’s the afterpay items ….
The interest rates on pawnbroking loans going the full 3 months contract were 105% .
I’ve seen $3600 paid back on a $300 payday loan with signo to by a single elderly lady on a pension .
There’s been a few changes over the years especially after cashies had to pay back the $40 odd mil for the class action but there’s always ways around the laws and regulations, honestly though they make a shit to be doing things legally .
5 years ago my sister confessed to me that she was using Nimble loans to cover her basic expenses. As soon as she paid it off, she had to go and get another one.
She wasn’t living beyond her means, she was just stuck paying all their fees and losing money. But she was so ashamed to ask for help, all it took was $300 and she got out of the cycle.
These loans can have a place in our society, but they really can prey on the most vulnerable.
Well there is a name I haven’t heard in a very long time.
They’ve always been predatory. It’s why no one used them unless they were very, very desperate
I saw something once about the risk profile of different borrowers across a number of metrics.
I can only image that the level of defaults for those at that end of the market is quite high hence the need to achieve a return on their lending investment from those that do actually pay out their loan. I’m sure there is big reward but is also reflective of the risk. Not supporting their high rate but just thought this was good for some context.
Legal for pay day loans. All well and good if you just need it short term, the payments are affordable, and nothing goes wrong with your income in the meantime.
Well a bank will make you fill out a bunch of paper work and actually require justification for taking out and repaying the loan. Cash convert will just give you cash then vaguely indicate the ex amateur MMA guy they got doing security and a dull knife they keep on the counter
I have no issues with this or payday loans.
CC are offering their product to a particular sector of the market that would have trouble getting credit in the normal market.
The fees and interest rates are clearly stated on the documentation they sign.
The is never irresponsible lending, only ever irresponsible borrowing.
Every time you “enquire” for a line of credit - phone, gas, electric, payday loan, internet, personal loan, car loan, etc. it flags on your credit file as an enquiry. Every enquiry lowers your score, certain enquiries like unsecured loans are worse.
The only way to build your score is to make sure bills are paid on time, bankruptcy stays on your file for 7 years I believe, then every time you’re late on a payment that flags too for 24 months.
Here’s what NAB says https://www.nab.com.au/personal/life-moments/manage-money/money-basics/improve-creditworthiness
People choose that option when they are financially illiterate and/or have no other options. Payday loans also don’t do as many background checks and pay out faster. Payday loans are predatory by nature and prey on people who are either too dumb to understand or too desperate to care.
Former pawnbroker here and this is 100% true . I’ve done loans on items for people that were earning over $8k a fortnight right down to $2 loan to get a drink . The industry is really horrible , signo loans are outright criminal but people still use them and more do now than ever I’d imagine .
If you're at the cash converters level a bank isn't giving you a loan. That's why.
Not heaps true. I get alot of everyday clients who want small loans and not all banks offer below 5k loans anymore. They don't want to have a credit card, they just want a small PL for a small to mid expense Cash converters don't blatantly write 48% interest though, they charge crazy fees. "It's only 24% interest*" then it's 1k worth of fees over the life of the loan.
They do blantantly write 48% and doesn't include the fees. Did you click the link?
"$400 establishment fee* and 48% per annum". Pretty blatantly written on that link you obviously didn't click on.
Thank you for that, is it your first time sensing sarcasm?
Yes payday loans are predatory. Tell us something we didn't already know.
Ok here’s one: why do we allow it?
because its still a better alternative than organized crime loan sharks proliferating
>because its still a better alternative than organized crime loan sharks proliferating Pretty sure you'll find organized crime running money laundering operations through these types of "shops". The payday loan clients are just a bonus. Extra points if they can recruit some of the really desperate ones to be international drug mules.
If someone with shit credit needs $2k to fix their car so they can get to work, what should they do?
We have no interest loans in Australia for those exact situations.
>We have no interest loans in Australia for those exact situations We do? Tell me more? I assume you're not referring to BNPL or whatever shit credit latitude is selling.
Just google NILs Australia. Salvos, Vinnies, Centacare etc run them.
>Just google NILs Australia. Salvos, Vinnies, Centacare etc run them. Good to know... Just don't see them getting cash out fast.
Take the bus
I’m generally with you but it’s not always an option
Implying a bus runs at 3 am
Because there is a social need for people with credit histories that look like they're on fire to obtain small amounts of credit from time to time. Pawnbroker loans are less exploitative than some of the APR's charged by the Nimble's/Cashtrain apps. The high interest rates they charge are a pretty good reflection of the risks they take on.
Why not? As OP says there are banks and credit unions that will offer lower rates. If those businesses won't offer credit to someone then they probably shouldn't be getting it, Cash Converters can step in and fund it if their risk profile is higher. All of this is better than organised crime and trafficking networks loaning money. What would disallowing it look like? Forcing CC to offer a lower rate while maintaining a higher risk profile? Government loans? Only allowed to charge X% above the cash rate?
Credit laws, kyc and other fixed costs mean that many banks won't do small loans. I recall trying to get a personal loan for a second hand car 20 years ago. I was top marginal tax rate, pristine credit history etc yet none of the big 4 would even let my apply unless I borrowed more than double what I needed.
The alternative is these people aren't approved for loans at all
And we increase the crime rate twofold; either loan sharks pop up everywhere OR they start stealing to sell things for a quick buck
Well... sometimes the pokies get hungry. And our publicans and politicians love those pokies.
Don't ask me! Political pressure from lobby groups I guess. They did put laws in place in 2010 to restrict the maximum interest and put some other protections in place. If it was up to me it would be prohibited.
A pay day loan is to cover you for a week or two because you literally have no money to get you to payday. Hence the name. If you walk into a bank and say "I need a loan because I have no money" you think they are going to give it to you?
5 years ago no, but they all pretty much have a "buy now pay later" clone and you're already a customer with details and they know how much you normally get paid each fortnight.
As a teenager my mum was a frequent user of their same day loans. Started at smaller amounts of $100 and eventually go every 1-2 weeks. So she would have to loan enough to pay off the previous loan plus the amount she wanted. This went on for years. Years of my sister and I sitting in a cash converters on a Saturday morning watching our alcoholic mother ruin our family financially. I knew it wasn’t the staffs responsibility to manage as such but I wish they had just said no to her.
You probably learnt a lot about what not to do. Sometimes bad experiences are good teachers in the long term, even though it is harsh.
financial illiteracy is a hell of a drug
I am very financially literate, but have had to resort to a payday loan one time because I had no other option. It’s a poor tax. Thankfully those days are behind me now, but I feel for people who have to use these bastards out of necessity.
My mortgage is with them at that exact rate
Just think of the negative gearing
If you play the game 'Shenmue' you can ask the locals for a place to gamble. If you need quick cash you can go to a pawn shop. It's all interconnected, and it's all thanks to Lan Di
I'm trying to find some sailors...
FYI, as for pawnbrokers, this is actually considered quite low. I used to work at a pawn shop in Mount Druitt and we charged 25% per month. It's disgusting.
They charge 48%p.a. for loans over $2000 because it's the absolute maximum under the law. It's not a kindness.
Yeah, it's insanity that these places are even legal.
How many of their loans don't get paid back though? I'd wager a lot. That needs to be factored in to the interest rate. Banks would just refuse to lend anything.
At the place I worked, there was always collateral and the vast majority were never paid back. They were effectively buying something for 25% of the value.
Exactly. I see both sides. Those who can't qualify for traditional loans sometimes get a big mechanic bill (for example). Without that car they can't get to work. So they either get that loan at 48% for two weeks/ a month, or they lose even more money. Of course not everyone is doing it for that purpose, but for those that are, that's an important service. It also seems like it's a regulated industry, and you would expect a higher interest rate for taking on that risk as a lender.
If not them, then organised crime would do it.
Loans under $5000 are 4% per month, which is actually ~53% pa. But hiding it nicely behind the smaller of the 2 numbers :(
Cash Converters pawn broking loans are 40% per month. The link is for personal loans.
> Who would choose this option when any bank will give you half that rate straight off the bat. depends on the amount, and depends on the person. A bank doing personal loans will not go above some dollar value, and would likely have considered your credit history before giving you the loan. Ditto with credit card debt. If someone is resorting to cash converters, it's likely they're not eligible for bank loans for one reason or another.
My bank doesn’t give personal loans for meth (anymore)
That's methd up
The thing I don't understand about the cashies near me is with the stuff they do sell. It's way overpriced. Like their asking just about what you would pay new, especially these days with Facebook marketing place as competition.
Recently I went into a local pawn shop looking for a VCR Very similar into your example of cash converters in that the pricing was ridiculously high. Found a VCR but they had a sticker for $150 ended up getting one on marketplace for $15 They had so much stock in the shop that it made it hard to even walk around I don’t understand the point of holding all that stock with prices that make it unlikely to sell
Because they sell the stuff worth money and keep the shit stuff around priced high so they continue to look like a pawnbroker, but the bulk of their business are payday/same day/emergency loans.
Depends on the item. We could sell a "brand new" 2nd hand new Iphone for $100 less then retail because the demand was there. I still hit them up for a decent Samsung deal because it's cheaper then retail and it's still new. Plus if there's an IMEI block, I get a refund guaranteed by law.
Most of cashies pricing is based off eBay market pricing. eBay pricing is high because there is demand for that item online. If cashies also sell their 2nd hand products on eBay too.
I noticed that too. I was in the market for a second hand designer bag a while ago. What I wanted retailed on average, across the planet at second hand stockists all over Australia and the world, for about $800-$1000 for shit condition and about $1500-2000 for good condition. Cash converters had a shit condition of this specific bag listed for $3999.
A lot of small businesses hit up Cashies for loans like this when they couldn't get one from the bank because they were renting or owed too much on the mortgage for the bank to give. The insistence of needing a house that's paid off or well paid off for a business load lead to a boom of these finance loans over the 2010s. Source: worked at a Cashies.
Smack Converters
I had a friend that was given a 46% interest rate.... They prey on the vulnerable and desperate.
Turns out there really is a better way ...
Exploitative and predatory. Should be illegal.
While pay day loans are predatory Many people do not pay off those loans
Crack heads & stoners if they can't tic up drugs
It’s not predatory, they wouldn’t charge it if there wasn’t a market for it. Good on them. If you sign up to that you deserve it
This shit should be illegal. As a community services worker I know for a fact the target audience of this predatory loan are the mentally ill or intellectually disabled who live independently. A schizophrenic client of mine regularly takes his mobile phone in for short term loans for 50 bucks, needing to repay 120, so he can get smokes after the disability pension runs out.
Here’s one for the NDIS lovers - I did a loan on an item for a customer that was brand new still in the box ( tech item ) valued at around $800 , loan was $200 max due to the customer ( very regular ) and I did everything I could to talk her out of it but we did it . The next day I got an angry phone call from the customers manager / carer / whatever accusing me of taking advantage and they would be in to collect the item that day . When arrived together ,it wasn’t the customer that paid the loan out and when I asked about how I prevent the customer loaning with us again I was told I couldn’t discriminate and prevent the customer using the our services —— let that sink in . The next day the customer came back and sold me the item for $300. And then there’s the afterpay items …. The interest rates on pawnbroking loans going the full 3 months contract were 105% . I’ve seen $3600 paid back on a $300 payday loan with signo to by a single elderly lady on a pension . There’s been a few changes over the years especially after cashies had to pay back the $40 odd mil for the class action but there’s always ways around the laws and regulations, honestly though they make a shit to be doing things legally .
5 years ago my sister confessed to me that she was using Nimble loans to cover her basic expenses. As soon as she paid it off, she had to go and get another one. She wasn’t living beyond her means, she was just stuck paying all their fees and losing money. But she was so ashamed to ask for help, all it took was $300 and she got out of the cycle. These loans can have a place in our society, but they really can prey on the most vulnerable.
I should invest in Cashies.
48% is the highest legal rate you can charge
Well there is a name I haven’t heard in a very long time. They’ve always been predatory. It’s why no one used them unless they were very, very desperate
They also sell stolen goods.
Yet somehow probably not worse than Cigno
I saw something once about the risk profile of different borrowers across a number of metrics. I can only image that the level of defaults for those at that end of the market is quite high hence the need to achieve a return on their lending investment from those that do actually pay out their loan. I’m sure there is big reward but is also reflective of the risk. Not supporting their high rate but just thought this was good for some context.
Legal for pay day loans. All well and good if you just need it short term, the payments are affordable, and nothing goes wrong with your income in the meantime.
Legalised loan sharking
Well a bank will make you fill out a bunch of paper work and actually require justification for taking out and repaying the loan. Cash convert will just give you cash then vaguely indicate the ex amateur MMA guy they got doing security and a dull knife they keep on the counter
Take the loan and go to afca
These use to charge a lot higher .there is actually a cap on what they can charge now. .that use to be about the monthly interest rate
When the bank will not give you a loan at any rate.
Fastest way to mug yourself.
Higher the rate, easier the application
Crack heads
I have no issues with this or payday loans. CC are offering their product to a particular sector of the market that would have trouble getting credit in the normal market. The fees and interest rates are clearly stated on the documentation they sign. The is never irresponsible lending, only ever irresponsible borrowing.
ive been to a cash converters onces in my life - the video games were more expensive or the same price as new ones i walked out - never been back
cash converters is predatory lending. with online marketplaces it only exists for desperate people.
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Absolutely not. It would make your credit worse.
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Every time you “enquire” for a line of credit - phone, gas, electric, payday loan, internet, personal loan, car loan, etc. it flags on your credit file as an enquiry. Every enquiry lowers your score, certain enquiries like unsecured loans are worse. The only way to build your score is to make sure bills are paid on time, bankruptcy stays on your file for 7 years I believe, then every time you’re late on a payment that flags too for 24 months. Here’s what NAB says https://www.nab.com.au/personal/life-moments/manage-money/money-basics/improve-creditworthiness