Advice on the ‘pay day’ moneylenders

LURGAN Credit Union is warning local people about the hidden costs of moneylenders.

The warning follows the publication of a new survey on Household Income by the Irish League of Credit Unions.

The first survey of its kind shows that 65% of consumers fear 2012 will be more difficult than 2011, 44% have less disposable income than 12-months ago while 150,000 people are turning to moneylenders and pay day loans to meet their bills.

The Board of Directors of Lurgan Credit Union stated: “The figures confirm that moneylenders continue to have a hold on many people in the community.”

The Household Income Tracker shows that a typical loan from a moneylender amounts to £300 with an average interest of 95% - leading to a repayment of £586. In addition to the high costs the ILCU survey also shows that 14% of those who take out a loan are unable to meet their repayments.

A Credit Union spokesperson said: “The figures stand in stark contrast to the affordable loans available to our members which are up to 15 times cheaper than those from the moneylenders.

“The impact of payday loan companies is also revealed, with the survey indicating that 40,000 people (4% of Northern Ireland residents) have taken such a loan to cover essentials such as food and bills.

“Payday companies are currently quoting loans of £400 over 31 days at a cost of £129 – the same loan from Lurgan Credit Union costs £2.30.

“I would again encourage anyone facing financial difficulties to come and speak to us at Lurgan Credit Union first. Unlike other lenders we are a not-for-profit community owned organisation and exist solely to meet the needs of our members.”

A quick survey by the ‘MAIL’ uncovered some startling loan figures from the pay day lenders.

Borrowing £50 from Quick Quid for 30 days would cost you a total repayment of £64.75 (a rate of 379% per annum). Their site also quotes a representative APR of 1,734%.

At Wonga borrowing £207 over 20 days would see you pay back a total of £254 - £41.82 in interest and a £45.50 fee. The APR is 4,214%

Explaining their interest rate Wonga’s website states: “Wonga charges the equivalent of just under 1% interest per day and that rate is applied to the loan amount and transmission fee for the period of the short term loan - usually between one and 31 days. The annual rate of interest is 360%.

“We know this may be hard to believe, because of the much larger Representative APR we are obliged to display. But that’s because the calculation required by law means that, where a loan is not taken out for a year, the interest rate must be compounded the same number of times the actual loan period would fit into a year.”