Fintech platform Lendela reports a rise in applicants with high-cost debts

Australians have been warned about leaning on risky high-cost credit options like buy now, pay later and payday loans.

More Australians are turning to risky high-cost loan options to help them meet their expenses, according to new data from a Fintech business.

Lendela, a digital platform that matches borrowers with lenders, reports a rise in the use of high-cost facilities such as “buy now, pay later”, advance salary requests and “small amount credit contracts” from its pool of loan applicants.

These facilities can provide immediate funds but often come with high repayment costs.

“These high-cost credit options, often characterised by steep interest rates or fees and minimal affordability assessments, can lead to the stacking of multiple loans without lenders being aware of each other,” Lendela Australia country manager Jake Osborne said.

“This may lead to a situation where monthly commitments outpace incoming funds, putting individuals in unsustainable debt cycles.”

In May alone, the share of borrowers using buy now, pay later schemes accounted for 23.5 per cent of all applications through Lendela, while 45 per cent leaned on salary advances, 10 per cent on credit cards and 40 per cent on SACC loans.

Lendela has recorded a rise in the number of young Australians looking to restructure their debt. Picture: Supplied

The share of debt consolidation applications, a method of packaging loans into a single product, is also rising among younger Australians, with a 62 per cent increase over the past six months.

Australians aged 18-29 accounted for 35 per cent of debt consolidation loans in May.

Australians on incomes between $50,000 to $100,000 a year also make up the

majority of debt consolidation loan applicants, about 58 per cent on average, Lendela states.

A debt consolidation loan is not synonymous with financial stress but indicates a drive to restructure debt.

“As we navigate increasingly difficult terrain, it’s crucial that lenders and regulators stay hyper responsive to ensure financial relief efforts don’t inadvertently increase Australians’ financial vulnerability,” Mr Osborne said.