Got no money and need a loan? No problem. The payday lenders will sub you the cash instantly… at huge rates of interest.
At this time of year, when the bills don’t stop but there’s Christmas to pay for too, a payday loan might be the only option. They provide fast, short-term loans to people with bad credit history. This can be a lifeline. But there’s a catch.
Such easy-access cash is underwritten by huge repayment rates. This might not be a problem if you can repay what you borrowed (borrowing £150 over 30 days with wonga.com means you pay a total of £202.15, for example). But not making the repayments lands further fees, greater debt, more stress… (some companies have annual interest rates of 5000%, for example).
Its the huge rates of interest that makes this kind of lending so profitable for the companies that do it. They cash in on what has been called the poverty premium. The poorer you are, and the less of a safe bet you are for the lenders, the more you pay. The lenders can justify this by claiming to be doing a favour to those who other lenders deem too risky to lend to. They often present their loans as an amazing opportunity. But if anyone really had a choice, why would they opt for such high-cost credit? Since when was debt an opportunity?
If you’re facing a payday loan that you can’t repay, there are things you can do. First. Don’t panic. On their website, National Debtline England remind people that a payday loan is a non-priority debt. Because of this, you cannot lose your home, any essential service or go to prison for non-payment.
Second, get the ball in your court. On their website, the Citizens Advice Bureau make a number of suggestions:
Don’t feel forced into borrowing more – pay day lenders aren’t allowed to pressure you to take out another loan to cover debts, or to ‘roll over’ your existing one
Stop the payment – you have the right to cancel any direct payment to the company, for example by cancelling a direct debit or standing order.’The Payment Services Regulations make it clear that you can withdraw your permission for a payment, or series of payments, to be made using your debit or credit card’.
Contact the lender – offer to pay a regular amount that you can afford
Make a complaint – if your lender doesn’t follow the rules in the Good Practice Charter, make a complaint. If you feel that the company have not handled your complain fairly, take your case to the financial ombudsman
Name and shame – if you see an advert for a payday loan that you think is irresponsible or misleading, share your ad using #paydaywatch on Twitter.
If your thinking of getting a payday loan, there are some alternatives, to the payday sharks, such as credit unions.
Credit unions are non-for profit community banks that people can join. Credit unions are co-ops, which mean they are owned and run by their members and not by shareholders. Anyone can become a member as long as they live or work in the local area. You can and you can become a member (and then save and borrow with them) usually by buying a share (often around £1). They are often fairly local. There is a Nottingham Credit Union, for example. Because credit unions are not-for-profit, they lend at very low rates of interest. Being member run means they are likely to be able to respond more flexibly to the individual circumstances of their members.
Find out more at www.nottinghamcu.co.uk
The National Debtline have a freephone line providing debt advice
0808 808 4000
The debt charity Stepchange provide free advice on debt problems
The Citizens Advice Bureau do the same
The consumer group Which? have info on how to make complaints about payday lenders at
Have you had an experience with payday loans and wanna share it? Wanna respond to this article?
Email Robin Hood Solidarity Group at email@example.com
Call us on 07747 431859
Visit us (Tuesdays 10-2) at Forest Fields Advice Centre, Wiverton Road