Latest research findings revealed today by My Home Finance, a national social lending organisation, show that people are still taking out short term, high cost credit without knowing the true cost to them or if they will be able to afford the repayments.
On the launch of My Home Finance’s Affordable Lending Campaign, findings show that just two in five people consider if they can afford a loan before they take it out, with nearly 20% of applicants not knowing if they will be able to make the full repayment on the amount borrowed.
Bob Wilson, Interim Chief Executive of My Home Finance said:
“Latest findings show people are still turning to high cost, short term loans when they need to access cash quickly. In the past 12 months nearly a quarter of adults have taken out a pay day loan – with 1 in 3 people turning to a friend when they are short of money. More worryingly, we have seen an increase in the number of people who are accessing log-book loans.
Once people have taken out loans, over a third (38%) have had to roll the debt over at least once in the past year, or have taken out an additional loan to pay off existing debt.”
My Home Finance launched an awareness campaign, with a host of supporting partner organisations throughout the UK including housing associations, Local Authorities, community organisations and the CDFA (Community Development Financial Association)- all of which believe that the need for affordable lending for all, and access to financial education must be made a priority.
Carol Matthews, Chief Executive of Riverside, one of My Home Finance’s housing association partners, said:
“Sadly, it is often those who can least afford it who pay the highest rates of interest. Unable to access credit from banks or building societies, some feel they have no choice but to turn to a payday lender, or worse, a loan shark.
We are committed to helping our customers lead resilient lives. My Home Finance helps us meet this objective by enabling our customers to manage their debt with dignity.”
“Since teaming up with My Home Finance, we’ve approved over 340 loans totalling £97,000. This has resulted in a saving of over £50,000 in interest compared to a high street lender. This figure would be far greater if the money was borrowed via an illegal loan shark, some of whom have been guilty of charging rates of up to 719,000%.”
Bob Wilson concluded:
“We need to raise financial awareness for people who regularly access short term credit for them to be able to understand what they are agreeing to and what they will have to repay. People are telling us that when they have taken out a pay day or door step loan that they do not feel in control of their finances, yet many people use this type of credit when they are desperate to access money.
Nearly 1 in 4 people don’t look at APR, interest or the cost payable when taking out a loan. My Home Finance gives customers clear and accurate information when they enquire about a loan so they know to how much it will cost them and when each repayment is due. As a responsible lender we only lend to people who can afford the repayments – it’s the fair and responsible way to provide credit – yet many companies are just not doing that. Morally, companies need to give people all the right information ahead of them agreeing to the loan. This is fundamental to ensuring that people are able to use short term credit to improve their lives, rather than it being a catalyst for a cycle of debt and poverty.”