Payday Poverty: Beware of Payday Loans
Scotland’s payday loan debt is currently a massive £99 million. Glasgow is the 4th highest payday poverty hotspot with 99,485 loans taken out during 2018.
These stats around payday loans highlight the need for more understanding of what is a payday loan.
Wonga collapsed and Wage Day Advance followed in their footsteps this year. However, there is still an abundance of high-cost payday loan sharks enticing customers with brightly coloured websites and happy smiley faces on their TV adverts.
The Financial Conduct Authority may have cracked down on some by introducing new rules on affordability, roll-overs and how they use the continuous payment authority (CPA). However, in desperate times customers still agree to the small print to pay for the weekly shop or to buy the 2 new tires required to get their car back on the road.
People may trust financial services businesses, assuming they are reputable and responsible because of their product however not making consumers aware of things like the CPA leaves families red-faced when their card is declined.
CPAs allow lenders to dip into your bank account with no notice, taking random amounts of cash to repay your loan if you miss a payment. Usually, they start small, £2 perhaps, just to see if there is any money to take. This then becomes £10, then £50 and so on until either your bank balance is zero or the debt has been repaid.
Across the UK, short term, high-interest lending reached £1.2 billion last year, according to the FCA.
There is no doubt that the FCA’s cap on payday borrowing has done some damage limitation however payday loans are still on the increase. StepChange saw a rise in new clients last year with high cost, short term debt – nearly 20% of all clients had high interest, short term borrowing.
Wonga and Wage Day Advance may no longer be in operation, however payday lenders, the small print and high-interest rates that come with them still exist. Whilst they may feel like an option to help with some urgent situations, the short term solution may make a debt position worse.
If you’re struggling with your debt and using payday loans as a solution, contact a member of Don’t Fret About Debt today for a long term solution to your debt – one that would help you pay off your debt in affordable monthly payments.
Call 0141 886 0017, use our debt calculator to work out the affordable monthly payments you could be made to clear your debt or speak to one of our debt experts using Live Chat.