Australia: NAB finds cure to payday loan issue

NAB has recently announced the introduction of a new loan service named Speckle, which has been created with the intention to provide a low-cost substitute to borrowers who require a payday loan. NAB has worked with a not-for-profit institution Good Shepherd Microfinance since 2003, aiming to provide low to no interest rate loans to people who are financially susceptible and NAB hopes that Speckle will lengthen this agreement.

Speckle has combined traits from other payday lenders to create a foundation, such as quick turnaround times and simple online applications. Speckle notes that most loans are given the green light within 2 hours and funds are normally transferred within 2 working days. However, it really sets itself apart from others by tackling the cost quotient.

"NAB has worked with a not-for-profit institution Good Shepherd Microfinance since 2003, aiming to provide low to no interest rate loans to people who are financially susceptible and NAB hopes that Speckle will lengthen this agreement."

The Australian Securities and Investments Commission (ASIC) has intensely regulated the small amount credit (SACC) market resulting in lenders not being able to charge more than a 20% establishment fee and a 4% monthly fee for loans up to $2,000. Speckle has chopped this in half and borrowers can now apply for a loan between $200 and $2,000 and pay a 10% establishment fee and a monthly fee of 2%.

Repayment can be between 3 – 12 months. RFi Group data suggests that 51% of current borrowers are uncomfortable (0-2 out of 10) with borrowing from Payday lenders and 59% of borrowers are uncomfortable with borrowing from a Payday lender as they think a loan from them would be expensive. With the advent of Speckle, maybe we can expect a change in these statistics.

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