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Rise of 115% in numbers applying for a short-term loan to pay their mortgage of rent

THE number of people in the UK turning to a short-term loan to cover their rent or mortgage has more than doubled, according to new statistics.

In the past two years the number of people applying for short-term loan who said they needed help paying for their accommodation increased by 115 per cent.

New data from FCA authorised credit broker CashLady found the total number of people applying for loans has also nearly doubled since 2015, with a 93 per cent increase in volume.

As well as the number of loan applications rising, the average loan amount requested by those struggling in the UK has increased by 45 per cent from £224 in 2015 to £325 this year. The statistics from CashLady come just weeks after the Financial Conduct Authority revealed that one in six people in the UK (17 per cent) would struggle to pay their mortgage or rent if it increased by just £50.

Earlier this month, the Bank of England’s Monetary Policy Committee announced it would increase interest rates for the first time in ten years — from 0.25 per cent to 0.5 per cent.

Figures also revealed that NHS workers still top the list of employees who most require emergency financial help.

They are followed by supermarket staff from Tesco, Asda and Sainsbury’s. Struggling members of the armed forces also make up the top five workforces requesting loans.

Managing director of CashLady, Chris Hackett, said being able to keep a roof over your head is “a basic human right.”

He added: “These figures, uncomfortable as they are, lay bare the state of the nation as people are struggling to cover their rent or mortgage payments.

“Wages for some of our most valuable members of society are just not high enough for them to manage basic living costs and they are regularly being forced to seek out short-term financial help.

“Housing expenditure is the largest monthly expense for our customers and they should be able to comfortably afford this before turning to emergency finance.

“We act as a broker for short term credit to help our customers find financial assistance from FCA authorised credit providers instead of seeking out illegal or potentially dangerous alternatives.”

The CashLady figures have been released after Chancellor Philip Hammond was accused of leaving ‘ordinary’ Brits out of yesterday’s budget, by failing to mention a wage boost for public sector workers, despite claiming to “support our key public services.”

Source: The National

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Are Short-Term Loans Cheaper Than Overdraft Fees?

There’s been a lot of news recently about overdraft fees — the fees charged by banks to their account holders after an account dips below a £0 balance, meaning the account holder has a loan balance, even if small, from the bank.

Earlier this year, The Telegraph published its “worst offender” index, listing banks that charged the highest overdraft fees for their customers.

Santander was one of the top offenders, with an unarranged overdraft fee of £6 per day capped at £95 per month. On arranged overdrafts of up to £2,000, Santander charged daily fees of one pound per day; rising to £3 per day for overdrafts of £3,000 and above.

Other banks were similarly expensive. Borrowing money on overdraft from Halifax could result in charges of up to £3 per day, according to the July 2017 article. Unarranged overdrafts incurred a whopping £5 per day fee, capped at a maximum of £100 in overdraft fees per month.

RBS and NatWest also charged heavy unarranged overdraft fees, with an £8 per day fee limited to a total of £80 per month.

With as much as £100 in monthly overdraft fees from many bank accounts, it’s been suggested that borrowing money through short-term loans could be a more affordable option for people in need of quick access to cash.

The numbers seem to agree. An August 2017 article in The Guardian calculated that many of the most widely used bank accounts in the UK charged APR rates of up to 52%, making them more expensive — in certain cases, depending on borrowing habits — than payday loans.

Banks, to their credit, appear to be changing their overdraft fee structures in an attempt to make borrowing less expensive for customers. However, many have admitted that as much as 10% of account holders could end up paying more for overdrafts under the new fees.

Despite public warnings about short-term loans, it turns out that overdrafts — even if used rarely and responsibly — could be a far bigger cost for many British bank account holders.

For example, a loan of £300 over 3 months from a short-term loan provider such as Mr Lender, results in a total repayable of £444.00 (£300 capital and £144.00 interest*) at an interest rate of 0.8% per day on outstanding capital.

The same amount borrowed via an unarranged overdraft could result in £300 in fees through a high street bank using many of the fee structures listed above.

Public perception of borrowing money — and the true costs of borrowing money — isn’t always in sync with financial reality. For years, borrowing from the bank has been viewed as a safe, cheap way to access finance; borrowing from a short-term lender has been viewed as the opposite.

The reality, however, is that the best loan for your personal circumstances may not come from the source that you first think of. Study and compare interest rates and fees and you could find that borrowing money via short-term loans is more cost effective than using your bank overdraft.

Source: News Anyway