More people could be tempted to take out payday loans in the cost of living crisis but there is much to be wary of, experts say
Some former payday loan providers were found to have sold people loans without checking they were really affordable, and had to pay compensation; some ceased to exist as a result, but there are still payday lenders operating in the market.
Overall, payday loans are only designed for very short-term use – but often people end up using them repeatedly, which is a very expensive option. “If you’re having difficulty meeting your financial commitments, help is available. Consider taking free and impartial debt advice from a charity like StepChange before resorting to high-cost credit.”There are several alternatives to payday loans if someone is struggling financially.
If the reason you need to borrow is because you can’t make ends meet for essentials, get help from a reputable organisation who will help you with a budget and help you choose and set up a suitable debt solution if you need one. “There are alternatives to payday loans, including borrowing through a local credit union where interest rates are likely to be much lower.
It said no borrower will ever pay back more than twice what they borrowed, and someone taking out a loan for 30 days and repaying on time will not pay more than £24 in fees and charges per £100 borrowed. Additionally, a YouGov survey published last month by Smart Money People found 40 per cent of UK adults will take out some form of credit due to the cost of living crisis, with households expected to borrow £101.1bn over the next year.
“This was deeply unfair as many consumers were left to negotiate debts with liquidators – or were unable to claim back cash for mis-sold deals.” “The new ‘high interest credit’ loans are being very careful not to gratuitously advertise their wares, perhaps learning the lesson from when payday lenders got cocky and drew too much attention to what they were up to.
“Initially, he asked to borrow £1,000 but I said no as I didn’t have that sort of money. I also took out a loan for £100 once and it took me months trying to sort it out.”
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