More Brits Turn to Payday Loans As Trust in Banks Diminishes
Overdraft penalty charges, fines and interest make going overdrawn more expensive than a payday loan.
Mar 23 2010 - 17:02 CET
Leading Payday loans broker Paydaybank.co.uk has today reported a 50% rise in loan applications via its website www.paydaybank.co.uk in the three months since the Supreme Court ruling found in favour of the banks in the OFT case regarding overdraft bank charges.
The largest payday loans broker in the UK found that payday loan enquiries to their website doubled during December, January and February.
Reluctance of banks to offer credit leading more Brits to explore alternative credit options.
Although December and January are seen as traditionally busy months for payday loan providers, the rise in applications continued throughout February, something Payday Bank believes is down to the failure of traditional banks.
Osad Hessel, Marketing Manager at Payday Bank explains;
"Analysis of our data showed that the number of applications began to increase from 27th November, 2009 onwards – significantly this was the day after the Supreme Court Ruling found itself in favour of the banks in the overdraft case."
"It looks like many people put-off taking out a payday loan until then in the hope that they would be able to claim back some cash from their banks. Now that that door has been slammed shut customers are looking elsewhere for affordable credit options."
Unsecured loan rates are at a 9 year high and credit card rates currently stand at a 12 year high, too. Combined with the reluctance of the big banks to lend to anyone deemed a credit risk and traditional forms of credit are now out of reach for many cash-strapped Brits.
Overdraft penalty charges, fines and interest make going overdrawn more expensive than a payday loan.
Additionally, Payday Bank’s findings come at a time when just 7% of the population completely trust their banks to treat them fairly, whilst one quarter do not trust their bank at all.*
Hessel continues;
"These government backed banks have been bailed out by the public but they do not extend that courtesy by stopping their customers going overdrawn on their accounts, instead it looks like they encourage additional consumer debt and then look to penalise their customers at every opportunity."
An investigation carried out by the Daily Mail in February revealed that the cost of an unauthorised overdraft with the leading banks worked out to be more expensive than taking out a payday loan. Hefty penalty charges alongside additional fees and interest mean going overdrawn on your bank account can result in 3,000% APR.**
Notes:
*Research from money.co.uk carried out in 2009 has revealed that following the Supreme Court ruling in favour of banks over 'unfair overdraft charges'.
** Daily Mail Investigation, 10th February, 2010: www.dailymail.co.uk
follow us
like us