Tuesday, 10 February 2009

Credit unions can help beat doorstep lending

There's a good piece here on the new United Reformed Church website on the role credit unions can play in helping people find acces to reasonably priced loans and cultivate the habit of saving. Credit unions are a way of building up communities from the grass roots and giving people back a sense of control over their finances and their lives. A really good alternative to the banks all of us love to hate in the current credit crunch.

A community worker for the United Reformed Church, Simon Loveitt, has highlighted the dangers of so-called ‘doorstep lending’ where borrowers may be charged exorbitant interest rates. He was addressing a conference organised by the Evangelical Alliance called ‘Life Beyond Debt’.
Simon Loveitt said the current difficulties in the financial markets had made credit harder to come by. But those who have a poor credit history or who are unemployed, had never found affordable credit freely available. For them, obtaining a loan usually meant using a sub-prime lender, who might charge an annual percentage interest rate of between 170 and 300 percent.
He quoted a documented case in York, in which a woman was offered a one week loan for £320, which attracted £80 interest over the seven-day period. When calculated over a twelve month period, the equivalent annual percentage rate would be more than 2.6 million percent!