Some households in uk opting for 3000% payday loans
22nd April 2012
National research carried out in the UK has shown that thousands of people living in Birmingham are taking out payday loans up to 3000% APR. Most are earning salaries of around £25,000 and the statistics show that they are relying upon payday loans to tide them over. More than 3 million people need to use a payday loan every month to keep their finances stable.“
The research, known as the 2010 OFT Review of High Cost Credit, showed that 34% of borrowers had children. The number of people using high interest pay day loans as been deemed ‘shocking’ by the Birmingham based Citysave Credit Union. The company currently provides a payroll deduction scheme and it charges its consumers no more than 26.8%.
The chief executive of the Birmingham Credit Union, Angela Clements, states:
“Credit unions have been promoted as offering affordable credit for many years, but we are shocked to find the number of working people in our city using payday loan lenders. Payday lending may be a recent addition to our financial provision, but it has become mainstream and crucial to many households. The cost to the individual is 3000 per cent and whilst this does not work out very much on a seven day loan, many of their customers are using payday lenders repeatedly.”
The Citisave Credit Union was founded in 1987 and it is a non profit organisation. When talking about the services that the Credit Union offers, Angela continues:
“As an alternative, Credit Unions may only charge a maximum of 26.8 per cent APR per annum. As this is set legislation, one may ask why payday lenders’ interest rates are not limited. Payday lenders tend to be large financial corporate organisations, and the cost of this borrowing takes money out of family household budgets of many people in Birmingham and out of our local community.”
While Birmingham was one of the worst affected areas in the country, payday loans with a high interest rate are a problem throughout the UK. Many people find themselves in a desperate situation where they can only borrow the credit that they need from a high cost payday loan.
Credit Unions Vs Payday Loans
Credit Unions could be a better place to start your search for the credit that you need. However, they are not always as easy to be accepted for as a payday loan is. The fact that payday loan lenders do not carry out a credit check is what draws many people in. Credit agencies can still turn down potential borrowers because of their history.
Another difference with Citisave and payday loan lenders is that with the Credit Union you have to first save some money. Once you have a set amount of savings in your account, you can then apply for a loan. Obviously this could take a while so if you are in need of credit fairly quickly then this is probably not the right option for you.
Overall payday loan lenders can offer the perfect solution to your financial troubles. However, there are so many lenders available to choose from these days that selecting one with a 3000% interest rate would be ridiculous.