Another politician has come out against short term loans in the UK, with Timothy Godfrey, a councillor from Croydon, jumping on the bandwagon when it comes to taking issue with instant cash loans providers.
Selhurst ward’s Mr Godfrey remarked that providers of quick loans don’t make it harder for people to apply for the extra cash in order to entice them into paying interest rates that he referred to as ‘extortionate.’ Croydon is home to several shops that provide the instant cash loans, an industry that has grown by leaps and bounds over the past few years as Brits find themselves in need of a bit of help to get to their next pay cheque.
Mr Godfrey took issue with the high APR interest rates charged by major microloan providers, as one of he larger lenders operating within Croydon charges as much as 4,214 per cent, leading the Consumer Credit Couselling Service’s Daniel Stevens to call the loans ‘a nightmare.’
However, the real cost of repaying such a loan is usually nowhere near as frightening as the four-figure interest rate implies. In fact, annualising the interest rate on a loan designed to be repaid in only a few short weeks is very misleading, as APRs are more accurate when used in longer-term lending of a year or more, economic experts are quick to point out.
Despite the growing throng of politicians and traditional lenders that have been critical of these instant cash loans, their popularity continues to grow. There may be as many as four million Brits taking out this short term credit, according to R3, an insolvency trade body.