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.
Below is an example of the costs of alternative consumer borrowing;