Westminster was awash with talk of a modern-day swindle last week, with a debate raging about 21st Century door-to-door lending, otherwise known as the Pay Day Loan or Payday Loans.
The Pay Day Loan is a short-term arrangement, typically from £50 to £1,500 for between 7 and 30 days with interest rates commonly starting at 600% and working their way up to 4,000% and beyond, when displayed as APRs.
- Any type of short term loan over a repayment period of approximately 1 month will always show a higher APR than the average 5 year loan!
Such loans have swamped the UK market since the mid-naughties and Consumer Focus estimate that around 1.2 million adults took such a loan in 2009, with each facility worth an average of £292, enough to allow hard-up families to meet the gap between when they run out of money (typically around the 20th of each month) and the next pay day.
During the parliamentary session on the 3rd February, the House of Commons voted in favour of introducing caps on the rates that can be charged for different types of credit. So is this good news for the vulnerable adults in the UK that rely on PayDay Loans.
Political tittle tattle, suggested that without an element of interference and regulation in this sector of the unsecured lending market, the knock-on effects to debt-levels in the UK would be considerable.
Economists would highlight that sky high prices for obtaining credit in this sector are simply a product of demand and supply.
- Demand from families struggling against a wave of rising fuel prices, rising supermarket bills, the great salary freeze and the disappearance of equity from the housing market.
- Supply (or the lack of it) emanates from High Street banks tightening up credit scoring and the flow of cash leant to the lowest earners in the UK and the small number of lenders in the Pay Day Loan market place.
- So what are the alternatives to PayDay Loans?
Sadly, the options for obtaining cash are few and far between. Short of accepting a loan from the local Tallyman, pawning the engagement ring, or hoping and wishing that your sure-thing in the 3.20 at Kempston romps home there are very few options.
- Unless of course you approach the problem from a different angle…
Making your money last for longer each month is perhaps a better way to closing the gap between spending one month’s salary and receiving payment of the next upfront in the form of a Payday loan.
- So why not try calling Lewis Alexander for a financial healthcheck?
Our lines are open 24 hours a day, seven days a week and call backs can be arranged. By understanding all of your financial commitments we are able to consider personal financial solutions that could help you manage your money.
Call us today on 0800 018 6868 and once we have completed your free financial healthcheck we can start to see if there is a way of reducing your monthly debt commitments. This may include making over-payments from savings, entering into debt management agreements or simply by re-arranging some of your payment dates to stretch your monthly salary.
Remember that there are many alternatives to expensive pay day loans simply call us FREE on 0800 018 6868 to hear about any options available to you!
