It turns out that payday loan companies such as Quick Quid are becoming increasingly popular among financially desperate brits…even more so than credit unions. Payday loan companies, sometimes known as legal loan sharks are putting the pressure on Brits to borrow more money than ever. With what seems like a never ending supply of advertising funds, payday loan companies have the power to stay in front of consumers more consistently than responsible lending companies such as local credit unions.
Insolvency body R3’s survey of over 2,000 British adults found that 4% – equivalent to 1.9m people – had taken out a payday loan in the last six months, while just 2% – 754,000 – said they have taken a loan from a credit union in the same period.
Interesting enough, the demographics of this group are aged 25-34 years old.
Legal loan sharks often charge consumers up to 4,000% APR . With such astronomical interest rates, it’s easy to see why so many families become trapped in a never ending debt cycle.
Phillip Sykes, deputy vice-president of R3, says:
Credit unions are often touted as an alternative to payday loans, but on this evidence they have a lot of catching up to do.
Payday loans have become one of the default options for those trying to tide themselves over from one month to the next, but there really do need to be alternatives. While high-cost, short-term credit might be helpful in some circumstances, payday loans are not a long-term option. They only dig people struggling with debts into deeper holes.
Phillip Sykes adds:
At the moment, credit unions aren’t ready to rival payday loans. They can’t compete on advertising and awareness or the number of loans they can make, while their lending policies are necessarily more conservative than payday rivals. Credit unions’ challenge to payday loans is a welcome one, but policymakers must give serious attention to helping them boost and fulfill their potential.
It’s plain and simple. The facts are staring us right in the face. If interest rates, rent, and costs of living continue to rise, we may see a huge surge in debt stricken families in the coming months.