By Emma Cichero I 6 November 2020 I Finance
A payday loan is cash fast to pay bills or make small purchases and are ultimately taken out as people are unable to fulfil current commitments using their regular income. When applying for a car loan, major lenders will check if you have any payday loans and if so, in the last 12 months, it could result in your car loan being declined.
A recent example: a client was looking for a $10k car loan. He was renting, had been working full time for six months and credit score was ok. But because nine months ago he had taken out a payday loan, Macquarie Bank declined him at 9% interest rate. Unfortunately, the next best option available was 18%, because there was a payday lender record on his credit file. The impact of this client was huge.
If you apply for a car loan, the application fee is often a few hundred dollars, or a small percentage of the total amount borrowed. If you have utilised a payday loan, however, that percentage fee can be up to 20%. Do the math: on a $2,000 loan the fees are $400 and that needs to be paid back as well which is a large sum for a small loan. Then you’re hit with account-keeping fees, which make it even longer to repay your loan. For a loan of more than $2,000, payday lenders can charge a 48% interest rate pa, which can really start adding up.
Call Emma on 07 5400 2549 to discuss your next application.