Leading Lancashire credit union CLEVR Money has warned of the dangers of making hasty financial decisions when taking out short term payday loans after the publication of new research.
Analysis by the New Economics Foundation found that 40 per cent of British people are struggling to make it to payday.
According to new research by Citizens Advice the news is even bleaker for those on zero-hour contracts or part-time workers, who are five times more likely to opt for high-cost credit from payday or doorstep loan companies, just to cover food and bills.
The report also revealed that almost half of UK adults (48 per cent) experienced at least one monthly drop in their income. At least one in five people (21 per cent) with a volatile income said they went without food or other essentials in order to pay their bills last year.
Commenting on the findings Mike Barry, chief executive of CLEVR Money, said: “These really are alarming statistics. Every day people are having to make really difficult financial choices just to make ends meet. These decisions are being compounded by payday lenders, many of whom are charging high interest rates that inevitably lead to consumers taking out additional loans just to keep their heads above water.
“The good news is that other options are available. For instance, at CLEVR Money we operate as a not-for-profit lender which means we provide our customers with some of the fairest rates around, whether it’s a payday loan or for something more substantial.”
A loan of £600 over six months with CLEVR Money incurs a total repayment charge of £664.65. The equivalent with Wonga*** is £1138.29. A quick calculation shows that CLEVR Money could save the consumer £473.64.
Mike added: “We all know that every little helps but this is a huge saving and clearly illustrates the financial benefits that taking a loan from a credit union like ourselves can make.
“Having an understanding voice on the end of the phone who can quickly assess individual financial needs and provide reassurance over repayment terms is a great introduction to the range of services we provide. Our aim is to encourage responsible savings and provide access to affordable low-cost credit.”