Personal loan complaints booming

The FOS 2016/2017 annual review revealed personal loan complaints were up 11 per cent on 2015-2016 figures, with those as young as 18 being lent jawdropping sums.

Complaints swelled from the 1831 made to the FOS in 2015/2016 to 2031 in 2016/2017 — an average of about five a day.

The shocking number was comprised mainly of complaints about personal loan products issued by banks, followed by credit providers.

MORE: How to buy a home quicker

MORE: Why spending makes you feel guilty

Finder.com.au money expert Bessie Hassan has warned Aussies to research whether a personal loan is right for them. Picture: Supplied

Finder.com.au money expert Bessie Hassan has warned Aussies to research whether a personal loan is right for them. Picture: SuppliedSource:Supplied

Finder.com.au money expert Bessie Hassan said more Australians were reaching for these risky loans as their disposable cash dwindled.

“As pay packets get consumed by large mortgages or high rental payments and other essential items, people have less cash for discretionary spending,” Ms Hassan said.

“As a result, the need for loans has increased.”

Ms Hassan said personal loan applications made through Finder.com.au had soared 77 per cent in the year to date, and expected a rise would have occurred across the market.

She said it was likely the uptick in dissatisfied consumers was due to lenders’ lack of transparency about product details, and that it was imperative customers did their due diligence before signing on the dotted line.

“The $6.16 billion, as of March 2018, in personal lending is indicative of the Australian need for personal loan products,” she said.

“However not everyone’s needs are the same nor is there is a one size fits all product, which could be why we’re seeing the introduction of more personal loan products.”

MORE: More Aussies choosing to save tax refunds

MORE: Myths that can prevent wealth

Many complaints to the Finacial Ombudsman Service regarding personal loans were to do with products issued by banks. Picture: AAP

Many complaints to the Finacial Ombudsman Service regarding personal loans were to do with products issued by banks. Picture: AAPSource:AAP

But some people have turned their backs on personal loans forever, including Sydneysider Arthur Psarakis, 24, who was lent a whopping $35,000 at just 18 years old from a bank.

Mr Psarakis explained his decision was ill-thought through, and said the insidious effects of the loan were crippling for those who didn’t do their research.

He said the interest rate caused the most pain, along with the fees incurred if he missed a payment date by as little as two days.

“When you’re in a desperate situation, you don’t pay attention to things like the interest rates and extra fees,” Mr Psarakis said.

“I had to work two jobs non-stop for two years to clear it… and incurred a few thousand (dollars) worth of interest.”

“It’s so important that you read everything, and understand everything properly before you choose.”

Hefty sums are being lent to consumers as young as 18 years old. Picture: Supplied

Hefty sums are being lent to consumers as young as 18 years old. Picture: SuppliedSource:Supplied

Ms Hassan said consumers were often tripped up by fees and the loan’s rigid structure, with some borrowers stung for attempting to clear the debt sooner.

“If you come across some extra cash and want to close out your loan, you can actually be penalised for doing so,” she said.

“And if your loan does allow you to make extra repayments, but you find yourself needing to draw upon that extra cash, you may not be allowed to.”

In light of the current banking royal commission, Ms Hassan expected another rise would be revealed in the FOS’s next report.

“Consumers are feeling empowered to speak up and ask questions, and if necessary, complain. So we could see an increase in complaints,” she said.

Krechelle from Eight at Home runs through some simple hacks that you can use to save you and your family money, from low intrest loans, to price matching and clearance bargains

IS A PERSONAL LOAN RIGHT FOR YOU?

1) Exhaust all your options: Taking out a personal loan can be a good way to finance a purchase, but it’s important to remember you’ll be paying interest on the amount owed. Depending on whether the loan is secured or unsecured, rates can hover between 7% to around 15%. When deciding if a personal loan is the right pathway to take, consider all your options such as borrowing from family or friends or seeing if a credit card is more suitable.

2) Ask yourself if you can afford it: Using online calculators such as repayment calculators or borrowing capacity calculators can help you decide if you’re financially ready to take out a loan. It’s also advised that you speak to a financial adviser if you’re unsure about applying for a personal loan. You should also consider your lifestyle stage before applying for finance. For instance, if you’re about to settle down and have a family, you should factor in the cost of a child when seeing if you can afford to service the loan.

3) Think about your security: If you have assets such as a property or a vehicle that you can use as security for the loan, this means you could benefit from a lower interest rate if you take out a secured personal loan.

4) Review the amount you need to borrow: The loan amount will help you decipher if a personal loan is the right product for you. As a rule of thumb, providers don’t normally approve amounts of less than $3000.

5) Consider the loan term: Generally personal loans come with terms between one and seven years (although, there are shorter terms available). Think about the time frame that would best match your needs, and if you can commit to a long-term commitment. Personal loans are typically suitable for large purchases ($5000 or more) like buying a car, renovating or funding an overseas trip, and for consumers who are comfortable borrowing over an extended period of time.

*Source: Finder.com.au

A NAB customer has been left flabbergasted after discovering the lender may have forced him to sell his home for less than its worth to simply pay off a business loan.

Revelations at the banking royal commission point to the fact the bank may never have had the right to take money from the customer’s sale in the first place.

About author