Industry experts say that newly relaxed credit union operating regulations have led to the alternative lending sources growing in popularity, with some stating that the lucrative payday advance lending industry could be threatened for market share.
Payday loan providers could see a drop-off in customers soon, due to many credit unions campaigning to make in-roads into the short term loans marketplace by offering similar products with much more permissive repayment terms and much less draconian interest rates, late fees, and finance charges. With the stress of debt taking its toll on many households across the UK, especially low income earners that could be suffering the effects of the sluggish economy through pay freezes or jobs losses, many have turned to payday lending as a way to make ends meet, only to suffer even more as their debt levels soon become unmanageable – but credit unions may be the answer to this widespread problem, experts say.
It can be incredibly difficult to dig oneself out from high levels of debt caused by rolled-over payday lending, according to financial experts, as charges and fees pile up very quickly to the point where a £600 instant cash loan could result in more than £75 in monthly interest payments, compounded by lenders not presenting borrowers with accurate information as to how the loan products operate. However, this differs from the way credit unions operate, as many will not offer lending to customers until sometimes months spent in re-educating borrowers on good financial sense; only then will a credit union agree to help a borrower consolidate their debts under a loan with a low interest rate.