An expert on credit from Hartlepool has announced that a instant cash loan of £200 could increase very quickly to £9,000 with 4000% interest rates hitting borrowers.
Broke families who seek out lenders from online searches to temporarily fix their financial problems have been told they could soon become up to their eyeballs in debt because of outrageous interest rates.
Citizens’ Advice Bureau heads have shown concern at the increasing volume of instant cash loan lenders promoting their services to broke prospective customers.
The issue is that with interest rates for some lenders gravitating around 3,000 percent, the cash owed can escalate at a quite incredible rate, particularly if the period of the loan is advanced.
In the last two years, the debt hanging around the heads of borrowers has risen four times as a result of short term loans deals, according to a spokesperson for the Citizens Advice Bureau.
The Office of Fair Trading recently initiated a review of short term loans businesses after discovering that many are taking unfair advantage of individuals experiencing financial problems, and pledged to come down firmly on any businesses found to be breaking credit regulations.
The manager of Hartlepool’s Citizens Advice Bureau said that in their area an increasing number of people are seeking help after falling foul of these lenders.
He elaborated by saying some of the interest rates were absolutely outrageous, and a loan that started up on a short term basis often ends up taking a long time to pay back.
The way they work seems to be that a £400 loan that is not paid back ends up in a further short term loan being offered which just exacerbates the debt situation of the borrower.
Most of these firms, such as PaydayPete.co.uk, PaydayUK, and Wonga do have credit licences to peddle their wares, so they are operating quite legally, but they are able to charge exactly what they wish. In the worse situations, vulnerable and frantic people have even had to forgo their homes because of excessive debts to pay day loans’ companies.