How consumers can help clean up the alternative lending market
An influx of alternative lenders and a seemingly unbreakable cycle of bad debt for borrowers have given the short-term loan sector a bad reputation. However, consumers have a role to play in helping clean up the industry. The first step – understanding how lenders should be acting.
ASIC requires lenders to conduct ‘reasonable inquiries about a consumer’s financial situation.’ This means inquiries must be made about the consumer’s actual situation and, while alternative lenders are known to be more lenient when it comes to bad credit scores and being on Centrelink, they must still gather enough information about circumstances likely to affect a consumer’s ability to repay their loan.
Daniel Wessels, Founder and CEO if Jacaranda Finance, says, “Our aim is to help people through tough times. We do accept some Centrelinkers and people with bad credit, and encourage everyone to apply, but we’re responsible lenders first. If we can see that you’re already overcommitted or don’t think you’ll be able to make repayments, we don’t approve the loan. Simple as that.”
We get a lot of flak for it and we get called a lot of strange things on Facebook for doing the right thing but we know that, when life dishes out lemons, people need access to small loans and so we’re here to stay – even if it means turning down more people than we accept. You’ll be surprised how many people complain about not being approved when they have unpaid loans in their name with other lenders. We’re not about to become a part of an unbreakable debt cycle.”
Even Google has jumped onto the bandwagon to help mop up the mess dodgy lenders have made. In May 2016, the search-giant announced their ban on Adwords that Pay-Day lenders would have a hard time getting their adverts approved and onto their Display Network.
“We’re open about our fees and loan structures, as we should be. We’re also open about the fact that short-term personal loans are not for everyone and we’re not about to stop being transparent just to get a few extra clients. We stand by our commitment to help people in a jam,” said Wessels.
When considering taking out a personal loan, or just looking for a ‘quick cash’ lender, Wessels suggests the following:
- Is there a friend or relative that can loan you the money you need, interest-free?
- Have you checked to make sure that the lender is ASIC-registered and displaying their Australian Credit License?
- Is the lender clear about the repayment terms and rates? If you’re left feeling unsure or they dodge your questions, run away.
- If you’re looking for a loan to help you out of other loans, or feel like your debt is becoming unmanageable, it might be time to seek out a debt councillor.
- If you have bad credit, you can apply for a loan but you should consider taking steps to improve your credit score, starting right now. Don’t leave it too late.
- Check that your lender is real – we may be developing AI technology, but you can speak to a human and we have physical offices.
- Look at the reviews. Head over to Facebook, head over to Google and do some research. More than just reviews, are there responses? It takes a lot of time to respond to 15,000 commenters every day – a pretty good indication of legitimacy.
