Weekly payday roundup: 7 days ended 13 sept 2012:
Things just seem to keep going from bad to worse this week, as not only has it been revealed that 1 million Brits use payday loans every month, this figure is sure to rise soon.
It was recently revealed by Spanish banking giant Santander that at least 1 million Brits use payday advance loans regularly in order to help meet ends in between pay periods, based on a recent survey. Payday loan providers are notorious for drawing people into debt due to massively high interest rates that balloon even higher if borrowers neglect to repay the loan in full before the end of the month, leading to many financial experts to discourage habitual use of these high interest rate short term loans.
Of course, the problem is that payday lending may be the only option for some Brits, especially if they have no alternatives. Anyone turned down for a personal loan, credit card, or authorised bank overdraft often have no other place to turn save illegal loan sharks, even though payday loans typically charge interest rates astronomically higher than any other source of more traditional lending.
Of course, things could be getting much worse in the future – especially for low income earners or anyone on government benefits, thanks to new reforms. Charities and opposition MPs have recently come out against the planned reforms, warning that the new systems to be instituted will only contribute to the problem of payday loan related debt by driving the economically disadvantaged right into the arms of eager lenders.
The coalition of charities and lawmakers submitted an evidence report to the Commons’ Work and Pensions Committee that numbered more than 500 pages, pointing out that transitioning to a monthly ‘Universal Credit’ payment system for government benefits is a step in the wrong direction. Before Universal Credit, benefits were paid out across the course of a month, which is preferable to these organisations, as they consider the shift to the new once-a-month payment system could lead to a more widespread use of payday loans and heap even more tension and stress on low-income families.
Moving to the Universal Credit system runs the risk of increasing debt levels and force people to rely even more heavily on high interest rate short term loans, said Manchester City Council. The local authority said that with so many Mancunian social housing tenant already in arrears on their rent, debt levels will rocket upward under the new payment system, with the unwelcome knock-on effect of increasing social ills such as criminality, domestic violence, and depression.