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I wonder what Amos would say to Australia as a nation as we sit back and silently allow this exploitation of people in financial trouble. As a Pastor I look in the bible to where the Prophet Amos was chastising the Nation of Israel for exploiting the poor whilst they enjoyed unprecedented prosperity. Reality is that these finance companies are nothing more than Loan Sharks who prey on the financially weak and financially vulnerable. However if you are late with a payment they charge you a fee of $38.50. Now this isn’t entirely right as the 4% would be reducing each month so in the interest of being fair it probably is more like a 50% interest rate instead of 56%. So 20% plus the 4% per month works out at approximately 56%. With the Loan Ranger they charge you an up front fee of 20% of the principal and then a 4% fee per month. Well if you work that out 52 X 34 it equals $1768 which would make the interest rate 76.8%. Now if you look at the image below you will see they are saying that the average loan repayment is $34 per week over a year. If you borrow $1000 from Cash Converters, you would pay back $680 over and above the original $1000 which means you have paid the equivalent of a 68% interest rate. Or 34.5% over 6 months or annualised to 69% Plus as the second image shows you will have paid a $45 application fee and a $1.15 per week ‘service fee’: Which all up totals $74.90 for the example we are working through.
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This is a total repayment amount of $1270.02 which means you paid $270.01 in interest. If you borrow $1000 from Wallet Wizard you will repay $211.67 per month for 6 months. Here are the details of the examples I worked through. But considering an unsecured personal loan from an Aussie bank is sitting about 13% how do these companies justify a 57% risk loading?Īnd if you are looking at using one of these companies or similar I would strongly encourage you to look for alternatives including the program called NILS – No Interest Loan Schemes:- Click here for the NILS Website Now I understand that people who take these type of loans often have a poor credit reference rating and are therefore the loan must carry a risk loading. For the record the highest interest rate legal under Australian law is 90%. Whenever is a 70% interest rate justifiable? Why does the Australian Government allow the operation of Loan Sharks within it’s borders. This simply is preying on the poor and vulnerable.