https://www.qms.space/ News en-US hourly 1 http://wordpress.org/?v=3.5.1 'Bank of Mum and Dad' Is Now a Top 10 Lender https://www.qms.space/blog/article/bank-of-mum-and-dad-is-now-a-top-10-lender 17 August 2018, 9:15 am Rising house prices and stagnant salaries are causing more Australians to rely on their parents for help when financing their first homes.

A recent study by Digital Finance Analytics found that the '...

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Rising house prices and stagnant salaries are causing more Australians to rely on their parents for help when financing their first homes.

A recent study by Digital Finance Analytics found that the 'Bank of Mum and Dad' now finances over $20 billion worth of home loans and deposits nationwide – enough to put this group among the top 10 mortgage lenders in Australia.

Around 55 percent of first time buyers now receive some form of financial aid from their parents. This may be funding towards their deposit or ongoing mortgage contributions. The average cash injection is around $88,000.

Why is this increasing?

House prices and minimum deposits have risen considerably over the past decade, especially in Sydney and Melbourne, while income growth has largely failed to keep pace. While this has made property increasingly expensive for new home buyers, those who already own a house have been enjoying equity growth, and many are tapping this resource to give the next generation a helping hand.

Parents who have already benefited from house price growth may be eager for their kids to step onto the property ladder themselves, sooner rather than later. However, those parents putting up the cash with the expectation of repayment down the line may be disappointed if the housing bubble bursts and price growth slows down.

Should parents finance their kids' homes?

Not all families are in the position of being able to finance their children's homes, especially those who weren't able to buy their own homes in the first place and may be finding it increasingly challenging to do so. Even those that can help the kids out should be aware of the considerable risk involved – not only to themselves, but also to their children.

Changes in personal circumstances, falling house prices and rising interest rates could all put a strain on finances across the generations, especially for parents who are still paying off their own mortgages or other commitments. Parents who act as guarantors for their children and pledge their property as security could also risk losing it.

What are the alternatives?

First time buyers who want to avoid leaving their parents in a sticky situation should talk to a financial adviser. They can tell you if you're eligible for a home loan, explain the different finance options available and help you decide what type of property and loan are the right fit for your circumstances.

If you're already in debt, you might find it harder to secure a favourable home loan. You should focus on paying off large and high-interest loans first, such as credit card debt, rather than lower priority debt such as a student loan. If you're finding it hard to manage multiple loans, you can talk to a financial expert about combining your debts into a more manageable monthly payment.

Don't forget that the state-funded First Home Owner Grant is available to all first time buyers who meet the criteria, offering $7,000 towards new builds or established properties.

Talk to our experts

If you need some advice about financing a home or getting out of debt, Debt Fix's experts can help. Call us now on 1300 332 834 for a no-obligation consultation.

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Payday Loan Machines Target Australia's Most Vulnerable Communities https://www.qms.space/blog/article/payday-loan-machines-target-australias-most-vulnerable-communities 3 August 2018, 11:08 am Despite the ongoing controversy around payday loans, lenders are continuing to find new ways to make short-term, high-interest loans more accessible to borrowers in need. Their latest strategy is auto...

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Despite the ongoing controversy around payday loans, lenders are continuing to find new ways to make short-term, high-interest loans more accessible to borrowers in need. Their latest strategy is automatic loan machines popping up in shopping centres in some of New South Wales' most impoverished suburbs.

Like other types of payday loans, these 'loan ATMs' offer short-term loans up to $1000 that must be paid back within 14 to 31 days. Comparatively high fees and interest are added to these repayments, while those who fail to make their payments on time – a common occurrence for those living in financial uncertainty – can face severe penalties.

How do they work?

Avoiding the stigma of dealing with a cashier, borrowers in need of quick loans can now access payday finance more discreetly using nothing more than their debit card, phone number and online banking details.

When they select the loan amount they need, it will be deposited into their account within 24 hours. The loan repayment will be automatically deducted from their account on their selected date after they receive their income – with around 4% interest and a 20% establishment fee on top.

With payday loans primarily targeting the most financially vulnerable people, The Sydney Morning Herald reports that these machines have appeared in some of the lowest-income areas of Sydney and NSW. These include the suburbs of Berkeley, Minto and Wyoming where the average weekly salary is 30% below the national median.

Staffed branches of payday lenders are also typically found in low-income areas across Australia.

Are payday loans a problem?

Payday lenders have been widely condemned by consumer groups for what is perceived to be their exploitation of vulnerable members of society.

Payday loans typically have higher fees and stricter penalties for missed payments than other types of loans, which can cause a difficult financial situation to become worse. These loans also lack protection for the borrower, who may enter a spiral of debt that can sometimes take years to escape.

On the other hand, as these lenders point out, they are offering a service that's in demand by people who may find it difficult to obtain finance elsewhere – especially as stagnant wage growth and rising living costs are seeing the number of financially stressed households increase every year.

The federal government announced plans to crack down on disreputable lenders back in 2015, but three years on, the Small Amount Credit Contract and Consumer Lease Reforms bill is still waiting to be put into effect. This bill would force payday loan providers to follow stricter rules, including not offering loans greater than 10% of a borrower's net income and restrictions on how they're allowed to market their services.

What are the alternatives?

Payday loans are never the only option. While they may look appealing for a quick fix, other credit options such as a personal loan or credit card with cash advance can offer greater security and lower overall costs in the long term.

If you want to know what options are available to you, call Debt Fix's financial experts on 1300 332 834 for a confidential, no-obligation consultation.

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