Looking for a short term loan? Look for your credit union
As another payday lender bites the dust, Ann Francis of Cambrian Credit Union asks whether we are witnessing the end of high interest payday lenders in Britain?
It is heartening to see the demise of payday lenders with their eye-watering interest rates that leave too many people facing a spiral of unmanageable debt.
The latest payday lender to cease trading, QuidQuid, comes hot on the heels of Wonga and The Money Shop this year alone.
QuickQuid had a staggering 10,000 outstanding complaints against it from customers claiming they were mis-sold loans they could not afford.
The collapse of these payday lenders follows a tightening of regulations by the Financial Conduct Authority, limiting interest rates and fees while introducing enhanced affordability checks, which made for tougher trading conditions for these companies.
And while ‘another one bites the dust’ plays in my head, there are also fears, especially at this time of year, that while the end of payday lenders is a step in the right direction, it could lead to a rise in loan sharks.
Have no doubt that these illegal money lenders are operating in communities across Wales, often areas you may least suspect, preying on those who feel they have nowhere else to turn.
The Wales Illegal Money Lending Unit (WIMLU) identified more than 300 loan sharks during its first 10 years of operation. Between 2008 and 2018 it identified 4,000 people in Wales who were victims of loan sharks and said that was just ‘the tip of the iceberg’.
There is another option to payday lenders and illegal money lenders. Credit unions offer safe and ethical savings and affordable loans for all members of the community.
As financial cooperatives, with no external shareholders, credit unions are able to offer loans at reasonable rates from as little as £50-£15,000.
Interest on loans is charged on the reducing balance and come with no hidden charges and no penalties for repaying the amount early. We even include life insurance as part of the loan, so that it gets paid off should the worst happen.
If you are borrowing this Christmas, make sure that it’s manageable and you don’t end up with a financial hangover in January: Shop around, compare both interest rates and the total amount repayable as well as the weekly repayment amount before committing to credit.
The tide is indeed turning but, ultimately, it’s down to individual choice who people turn to for financial support – just make sure it’s the right one for you and your pocket.