Credit union warns locals about hidden lending costs

One credit union located in Northern Ireland has warned local residents to beware the hidden costs in payday advance lending, experts say.

The new warning from Lurgan Credit Union follows on the heels of a household income survey recently conducted by the Irish League of Credit Unions that found that 65 per cent of those surveyed had fears that this year will have more financial difficulties in store than 2011.  44 per cent of respondents indicated that their disposable income levels had plummeted in comparison to last year, the survey found, while around 150,000 regional residents may be turning to instant cash loan providers in order to make ends meet.

Providers of instant cash loans continue to have a strong grip on many within the community, based on the survey figures, said Lurgan Credit Union’s Board of Directors in a recent statement.  Typical loan levels in Northern Ireland, according to the household income tracking survey, stood at around £300, though after fees and interest is taken into account, many borrowers find themselves repaying as much as £586 before being free and clear of the loan – and around 14 per cent of those surveyed admitted to not being able to repay their loans on time.

A spokesperson for the Credit Union remarked that these figures stood in strong contrast to the lending available for members of credit unions.  The typical credit union loan can be as much as 15 times less expensive than one of these alternative loans, the spokesperson added.

A typical payday lender will charge much more for a loan than a credit union, the spokesperson said, with the average cost of a £400 loan to a credit union member being only £2.30 – an incredible savings over one lender who required £129 from a borrower for the same amount of cash, the spokesperson pointed out.

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