Say no to payday loans campaign launched
A special campaign has been launched on the eve of Payday Loan Danger Day with a warning that there are ‘some sharks you can’t see coming’. The campaign is being led by Coast & Country, a social housing provider in Tees Valley in the North East of England.
Payday Loan Danger Day is the date when people struggling to make ends meet are tempted to take out a pay day loan, it falls on 24th January and is caused by the long gap between December and January wage packets. According to ICM research commissioned for the campaign, more than thirteen million people nationally were paid on December 24; ahead of the Christmas holidays but nearly six weeks before the next payday on January 31st.
Coast & Country, one of the largest regeneration and housing companies in the North East, is launching the campaign to counter the large scale advertising of payday loan companies and highlight other forms of affordable alternatives, including credit unions. Teams of experts from the Coast Country will be on the streets talking to local people, while advertising vans will tour estates to ensure the message hits home!
*Kevin, 44, spoke of the stress and anguish he experienced after taking out a high interest loan.
He borrowed £500 to fund the family’s Christmas and soon found himself sinking further into debt with the money he owed spiralling to £1,500.
As a self-employed lorry driver, he was unable to tax his vehicle. As a result he was unable to work and even ended up having to sell his lorry to pay off the debt.
Kevin said: “It made me ill. The situation went on for about a year including being barraged with phone calls chasing up the outstanding debt.”
He added: “My advice to people is stay away from these types of loan. It does not matter if it is a matter of life and death or how desperate you are for money – do not do it.
“It nearly ruined me and I would not want anyone to go through what I went through.”
*Name has been changed to protect the identity of the case study.
Iain Sim, Chief Executive of Coast & Country, said: “Households already are struggling to make ends meet as the price of everyday basics such as food, gas and electricity soar.
“This month there is even more financial danger as payday loan ‘sharks’ are circling. People need to make their money last longer due to getting paid earlier than usual because of the festive break.
“Payday loan danger day is January 24th and on that day we aim to make our area a ‘Wonga free zone’.
“People should beware of locking themselves into high interest rates, some money lending websites charge more than 4,000 percent.
“It is so easy for people to find themselves on a payday loan treadmill as they resort to taking out another loan to in a vain attempt to balance their budgets.
“By saying no to payday loans, people can avoid getting into financial deep water. Our teams are ready and available to offer free, independent advice to help prevent people from drowning in debt.”
PAY DAY LOANS VERSUS CREDIT UNIONS:
With some companies, borrowers can choose between one and 30 days to settle a loan.
If someone borrowed £250 from Wonga and gave themselves a 28-day deadline to pay off the loan, they would incur £76.06 in fees and interest. This would take what they owed from £250 to £326.06 and would involve a massive weekly payment of £81.52.
However, there are much more affordable alternatives such as **Community Banks, also known as Credit Unions, where people can access money at reasonable rates.
In sharp contrast to a payday loan, £250 borrowed from a typical Community Bank could be paid back during a year at a cost of £5.30 a week, which is an APR of 19.6 percent.
Coast & Country has drawn up ten top tips on how to get out of debt and manage money:
- Don’t ignore debt: make it the first thing that you deal with.
- Look at which debts need to be paid off first such as your rent, council tax, gas and electricity.
- Don’t ignore letters: make sure you reply to everything you get and make a payment plan to pay back your debt.
- Talk to the companies to which you owe money: tell them all your details and how you are going to pay them back.
- Make a budget and fill in a financial statement: look at your income and your outgoings, stick to a budget and decide how much of your debt you can afford to pay back.
- Save money to make money: look at your spending and how you could save money, save energy, compare gas and electricity and supermarket prices.
- Stop borrowing: do not take out any more loans and do not borrow from a payday loan website or a doorstep loan shark to pay off your debts, as they charge much higher rates of interest. If you do need to borrow look at affordable avenues such as Community Bank/credit unions.
- Check your benefits: make sure you are getting everything to which you are entitled.
- It’s good to talk: make the most of the help and advice out there.
- Don’t panic: there is lots of help out there.
Coast & Country tenants can access its money management services by calling 01642 771424 or visiting helpwithmoney.cch-online.org.uk.
Other organisations that can help with money management include:
The Money Advice Service: www.moneyadviceservice.org.uk
Citizens Advice: www.citizensadvice.org.uk
UK Credit Unions - www.ukcu.co.uk