Short term loan dangers quite real, credit union boss warns

Weekly payday roundup: 7 days ended 18 Jan 2013:

The boss of one Ilkeston-based credit union says that the dangers posed by providers of short term loans are quite real and should be avoided at all costs.

Seamous Grant, the stalwart leader of Erewash Credit Union, has spoken out against the growing – and quite distressing – trend of local residents seeming to attract terrible levels of unsustainable debt more and more by taking out high interest rate short term loans from disreputable, predatory lenders. In fact, Mr Grant remarked that the credit union is seeing more loan applications than ever before for the month of January, most likely due to the rampant Christmas spending debt accumulated by local households falling victim to the siren song of payday advance lenders promising fast cash and instant loans for all their festive season shopping needs, only to attempt to suck these poor residents dry with their massive interest rates and late fees when it comes time to repay the loan.

The differences between loans sourced from credit unions in comparison to those from your typical payday loan provider are simply night and day, Mr Grant remarked, especially when it comes to paying interest on the loan. Unlike loan providers like Wonga and QuickQuid that charge annualised interest rates in the four figures – Wonga alone charges 4,214 per cent APR – credit unions are bound by law to charge no more than 2 per cent every month in interest to their customers.

Still, residents are turning to these very same payday loan providers in greater numbers than ever before, as evidenced by the number of loan applications the credit union boss has seen this January. It used to be that the beginning of every year was relatively peaceful and serene, said Mr Grant, but now Erewash is awash with nervous borrowers looking to find a way out of their payday loan debt.

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