By Mike Edwards.
During 2011 when in theory the latest credit crunch has still really to hit home, data shows that almost one million people have had to take out a payday loan at 4,000% within the last year to pay their rent or mortgage. In total, seven million borrowers and tenants are relying on some form of credit to pay their housing costs.
As well as payday loans, struggling borrowers and tenants are taking out unauthorised overdrafts and other loans, or using credit cards. A survey carried out by YouGov for Shelter asked 4,014 people if they had used these forms of credit to help pay their rent or mortgage in the last 12 months.
One in seven respondents (15%) said yes.
These shocking findings which show the extent to which millions of households across the country are desperately struggling to keep their home. Turning to short-term payday loans to help pay for the cost of housing is a totally unsustainable form of financial existence.
Unfortunately following hot on the heels of lax banking regulation it appears the UK offers easy pickings and slow retribution for the world’s payday lenders who have been regulated out of other countries and find a far more relaxed regime given our lax supervision.
That is why these 4,000% APR lenders are exploding across British high streets. Yet the astronomical APRs aren’t the real danger – that comes from the rollover penalties where people cannot repay at the end of the month. Then what was intended only to be a short term emergency provision allows the compound interest rates to kick in.
There is now strong evidence now of people using payday loans to meet every day needs too not just to pay housing costs. Many households struggling with core rent or mortgage commitments will of course struggle to repay payday loans on time too.
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