Citizens Advice Scotland have joined with Shelter in expressing concern at the huge numbers of people who are taking out payday loans and other credit, in order to pay their rent or mortgage.
Shelter have published evidence today showing that 2% of the UK population have admitted to paying their rent or mortgage using a payday loan, and a further 13% (around 7million people) have done so by taking out other forms of loan - including unauthorised overdraft, credit cards etc.*
Responding, CAS Head of Policy Susan McPhee says,
“The fact that so many people feel that a high-interest loan is the only way to avoid homelessness is yet another stark indicator of the desperate state many families are in. It also underlines the need for good quality, free independent advice services.
“We certainly recognise the picture of people who are unable to pay their bills. Every CAB in Scotland is having to deal with case after case of such people every day. Often people are in tears when they come through the door – they simply can’t afford to pay their bills and they feel they have nowhere else to turn.
“But taking out a high-interest loan is never an advisable thing to do, for any reason. And using one to pay your rent or mortgage is an extremely dangerous step. No matter how attractive these loans might seem at the time, you have to look at the small print and see how much you’ll have to re-pay. The truth is that any short-term relief you get will fade very quickly. The slick TV adverts are very well-made, but they never show what happens a few weeks later when the rent or mortgage is due again and the person is even worse off.”
Susan is keen to stress that people in such situations should always seek independent advice, and that alternative courses are almost always available.
“Its important to get the message out to people that they do have other options, and that expert advice is available for free. Before they take out any sort of loan they should get advice on what other option they may have. At the CAB we don’t have magic wands unfortunately, but our trained Money Advisers can usually offer some sort of solution.
“For example, the person may be entitled to benefits or tax credits they are not aware of. This might seem unlikely, but in fact CAB advisers regularly find cases of people who are missing out on some sort of benefit or grant - just because they didn’t know about it and so had never claimed it.
“If you go to your local CAB they will do such a benefit check for you, and will also give you advice on other ways to maximise your income without turning to high-cost lenders. If you have already fallen victim to a pay-day loan or any other type of debt and are struggling to pay it back, we can help you with that as well. And our advice is always free, confidential and impartial.
“But the best advice on high interest and pay-day loans is to give them a miss altogether. They may seem like the answer today, but they are likely only to make your situation much worse tomorrow.”
For more information, interviews etc., please contact Tony Hutson on 0131 550 1010.
* These are UK figures, but Shelter Scotland have said they confirm the trends in Scotland.NB This CAS press release is issued in response to one issued by Shelter, which contains more details of their survey.
- Debt accounts for over a quarter of all the cases the Scottish CAB service deals with.
- Over 40% of CAB debt client have told us they have gone without food or fuel in order to try and pay off their debts – in many cases because they were being pressurised aggressively by their creditors.
- Last month (Dec 7th 2011) a survey by the insolvency group R3 found that over half the population had taken out a payday loan.