Coronavirus leaves more people vulnerable to loan sharks and high-risk sources of credit
9 September 2020 at 6:01 pm
In response, Good Shepherd Microfinance has launched a new no interest loans scheme to help people during the coronavirus crisis
With many struggling to make ends meet during the pandemic, financial counsellors and support services are urging people to take advantage of counselling and no interest loans instead of high-risk sources of credit.
Since the outbreak of coronavirus, organisations such as Good Shepherd Microfinance (GSM) have assisted thousands of people with their finances.
Research commissioned by the organisation in August found that 60 per cent of working Australians on average or lower incomes had experienced employment changes such as having hours reduced, their pay cut, being stood down or being made redundant, creating a new class of economically vulnerable people.
CEO of GSM Stella Avramopoulos said that many people who had never had to ask for financial support before were now struggling, leaving them open to loan sharks and other high-risk sources of credit and cash.
“People are overwhelmed, they are distressed, and they often feel stigma and shame. This is a crisis that no one expected, it has hit suddenly and it is out of peoples’ control,” Avramopoulos said.
“The main driver of the financial crisis for the people we are seeing is credit card debt and personal loans and nearly all of the people referred have at least one payday lender.”
Jeremy Levine, the general manager of service and strategy impact for GSM, told Pro Bono News the organisation had also noted an increase of “too good to be true” credit sources over the past six months.
“Anecdotally we are seeing a lot of advertising for sources of credit that seem too good to be true, which means that they are too good to be true,” Levine said.
In response to the increased demand during the pandemic, the charity – which for over 40 years has offered no interest loans of up to $1,500 at a time for items such as whitegoods, washing machines, fridges, school needs and furniture – has recently launched the Household Relief Loans Without Interest program.
The program, supported by the federal government and National Australia Bank, includes financial information and support, and access to loans of up to $3,000 for rent and utility bills for singles earning under $60,000, or for couples earning a combined income of less than $100,000.
Levine also said that it was important the community services sector collaborated effectively to assist financially vulnerable people.
“It’s important that we collaborate across the sector to ensure people get all the support they need and information about the services they may need,” Levine said.
“We know that about 20 per cent of people who come to us have a social vulnerability including family violence, disability, gambling, mental health, relationship or substance abuse issues.
“People who come to us for financial support may need referrals to a range of other services from across the sector.”
More information on the program can be found here.