Some families this Christmas are not as fortunate as others. Reports out this week claim that nearly a million families will use these loans for bad credit over the Christmas period, covering anything from presents to tinsel.
While most will be bearing the brunt of not having everything they want this festive season, some are being lured in by Christmas themed websites and offers, tempting them to take out these high interest loans.
Think before you sign
The loans offered operate on a short term basis. This means that the borrower will be expected to repay the loan within a very short space of time, failure to repay on this date often leads to them being hit with double the amount of interest, this can lead to debts, bailiffs and CCJ’s.
The sites offering the Christmas themed loans often are not regulated and simply act as a go-between for the official lenders, who then pay the referrer a commission.
The use of brokers by the large lenders was identified during the clampdown on payday lending last year, however, it appears that the practice is still occurring, albeit on more transparent scale.
Fiona took out a payday loan last year to deal with her shopping and errands for the festive month. She quickly ran into trouble and was forced to take out multiple payday loans in order to repay the subsequent loans.
This rolling over of loans is exactly the type of high-cost lending that the watchdogs were introduced in order to stop.
Indeed most felt like it had been stopped with a cap on interest rates introduced and most lenders being forced out of business.
“I was on benefits at the time of £600 per month. I quickly realised that I was not going to be able to pay the loan back as set-out. This lead me to taking out more, then more until I got to a point that I knew I had to stop,”
“My credit is now pretty much non-existent.”
The case of Fiona is not by any means out of the ordinary. The industry watchdog claims that up to 40% of people run into difficulty repaying their loans as agreed.
While she says she has ‘learnt her lesson’ from the experience, payday lenders are now under closer scrutiny when it comes to checking a customer’s suitability, with industry-wide checks on affordability incorporated into the application process.
Advice if you have to use a loan
Consumer advocate and financial guru Pete Howes sets out his recommendations;
- Be cautious with your personal details and don’t rush into any type of agreement
- Companies claiming to be your only chance of getting as loan should be avoided
- All options need to be considered, such as local credit unions etc
- Make yourself very familiar with the charges you will be expected to pay
- If you’re worried about debt or feel that you’d like to talk to someone about finances the Samaritans can be reached on 116 123 from anywhere in the UK.
Options outside of loans for Christmas
- Try shopping in local charity shops for presents, you can pick up games, books and other bits that are virtually brand new, saving you cash in the process.
- Reduce the cost of presents by adopting a secret Santa present-giving system. This means that each person is ‘secretly’ responsible for buying only one present for one person. Each person then only gets one present, meaning that you don’t have to buy a present for everyone. Not only that but else everyone saves money also!
- Simply don’t go to crazy. Young children love Christmas but you don’t have to put yourself in debt for it. Set a budget for each child and stick to it. This may mean economising, but so be it.
- Be thankful. Christmas isn’t solely a monetary event, love the ones around you and give thoughtful gifts rather than expensive ones.
Even though it’s not cool to be kind, part of us wants to be kind. We just need someone to show us how, someone to break the pattern our culture has trapped us in. Considerate acts have a ripple effect, and we remember them long afterward. Kindness is contagious and now is the best time to spread the condition. In the face of trying economic times and social strife, it is absolutely necessary that we begin behaving like caring individuals. The next time you see someone in need, simply take the time to help them out. The old saying ‘what goes around comes around’ is absolutely true. Start shaping your karmic fate for the better right now by participating in random acts of kindness.
So even if you don’t have a bulging sack of presents for each of your loved ones this Christmas, who says you can’t shower them all with kindness? Try it, it might just be the best present you can afford to give this Christmas.
Written by Andrew S.