Finance experts are advising Australians against the use of money lending apps as the popularity of the programs increases.
Over 1.5 million Aussies have been using pay on-demand mobile phone apps and websites that came out in the last 18 months. These are most popular among younger generations, with one in five Zoomers using the apps for quick money.
Kate Browne, personal finance expert for Finder, said that although the services aren’t necessarily bad, they can lead to bad habits when it comes to money.
In terms of gender, men use these apps more often than women, the most popular ones being InstaPay, MyPayNow, and CommBank AdvancePay.
Ms Brown further stated that the brands show some differences. Services like InstaPay charge employers to allow their employees to receive their payment earlier and are a much cheaper option. On the other hand, bank-offered services like CommBank AdvancePay are pricier.
Still, the applications are frowned upon by the Consumer Action Law Centre mostly due to the high-interest rates. In fact, the interest rates can reach up to 5% of the borrowed amount, meaning you could pay $25 for a $500 loan.
Finally, Financial Rights Legal Centre policy officer Julia Davis stated that even though these companies are calling their apps innovative, they are simply taking advantage of loopholes in the law.