Letter - Payday loans and lifetimes of debt

With reference to your article last week on payday loans. Your article suggests that in many cases the Payday provider did not assess the individual’s ability to pay back the loan.

If the customer of a payday loan had the ability and the means to pay off this type of debt they firstly would not require the loan and secondly would be able to go to a normal bank and get an overdraft facility at a normal bank rate of between six and 30% APR. Payday loans serve to trap desperate individuals into a lifetime of debt.

The fact is that people using payday loans tend to have many other loans and credit cards and are desperate. Could someone tell me how a payday loan customer who is in need of £300 at the start of the month can pay back £397 (Wonga rates) at the end of 30 days thereby starting the following month with all their existing bills and commitments together with having to find this additional £397?

It is quite clear that these payday lenders have to charge such excessive interest rates due to the fact that many of their customers ultimately default on their payments or require an army of telephone and enforcement officers to get their money back causing untold stress and anxiety to vulnerable individuals who are in extreme financial difficulties.

The solution is clear the government must cap interest rates at a sensible rate and clear the streets and TV advertising of all loan sharking both legal and illegal.

We should educate our children at school about personal finance and family budgeting. Banks should also play a part in education of any of their customers who require help and guidance prior to getting loans and for those customers the bank cannot grant a loan to they should be offered further free financial advice.

Getting a payday loan over 30 days at an APR of over 5,000% cannot help in any situation; it can only make the matter worse both short term and long term.

David Kaye

Oakland Crest