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Are people turning to loan sharks for quick cash?

A huge drop in payday loans given out to people short on money has increased fears of a rise in borrowing from illegal lenders. Yet safer, cheaper ways to borrow do exist and they should be your first port of call if you’re looking for some quick, short-term cash options.

Fall in payday loans

Today’s report by the Consumer Finance Association (CFA), the trade body that represents short term lenders, says eight out of ten short-term loan applications are now turned down.

CFA figures also show the number of payday loans given each month in 2015 is 70% less than in 2013.

This fall in people receiving payday loans follows tighter regulation of the industry. This includes new rules introduced last January that caps the fees and interest that can be charged to no more than double the amount borrowed.

Loan shark dangers

If you’ve been turned down for a short-term loan, it’s no surprise you may look elsewhere for the money.

The CFA report suggests that 4% of people who are rejected for short-term lending go to unlicensed lenders instead. The same survey also showed that more than three quarters of people are unable to tell if their lender was licensed or not.

If you search online, for a loan, watch out for websites which look legitimate but are really based overseas. They won’t have to follow the new regulations capping fees and charges, so you could end up paying far more than you expect.

However, loan shark lenders are probably the worst option. Though these illegal lenders will often start out friendly and supportive, not only are interest rates far more than elsewhere, missing payments could lead to harassment or pressure to borrow more money to cover costs.

Alternatives to payday loans

Instead of going down these routes and taking on additional debt, consider all the alternatives available first. 

Depending on why you need the money, you’ll find lots of different options. You might even find you don’t need to borrow money at all.

A sign of bigger money problems

We asked our debt expert Colin Kinloch his advice for anyone needing short-term cash.

“While for some people high cost, short term credit can be a useful source of money to help with unexpected costs, if you’re using this kind of borrowing regularly to manage household finances then it may mean there are underlying financial difficulties. It is vital to get to the bottom of this before taking on extra credit.“

“If you are finding your budget is stretched each month then it is worth taking advantage of the free debt advice which is available across the UK.

This free, impartial advice across the UK will help you get your finances back on track and make those monthly payments feel more comfortable.”

 

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