Cost of living crisis: County credit union warns against PayDay loans and loan sharks

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Faced with rising inflation, soaring bills for utilities and seemingly weekly increases in food costs more and more people are struggling to pay their bills.

Now Credit Union CLEVR Money, the credit union for Preston, Blackpool, Fylde,Wyre and Lancaster, has warned of the financial disaster many could face if they resort to using high interest loans.

The warning comes as the Credit Union, a not for profit company with some 5,000 members, reported receiving a rising number of applications for loans.

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CLEVR Money mangers Anthony Brookes and Jackie ColebourneCLEVR Money mangers Anthony Brookes and Jackie Colebourne
CLEVR Money mangers Anthony Brookes and Jackie Colebourne

Anthony Brookes, loans manager said: “The rising cost of living is certainly hitting people in our communities hard and we’ve definitely had an increase in loan applications as a result. Over the last few months, however, we’ve seen more and more people applying for smaller amounts to ’tide them over’ to cover unexpected costs and even pay for bills and general expenses.

"The most worrying factor is the growth in working people contacting us, those who were just about getting by on their wages but who are facing significantly increased outgoings with no increase in salary, some of the new fuel bills alone are terrifying them.”

He continued: "We know people are turning to other forms of lending such as PayDay loans, Buy Now Pay Later and even loan sharks, which is a huge worry for us. Those sort of loans can very quickly turn bad as the debt spirals when penalties and fees are imposed or more money lent without the borrower having the means to pay it back.”

The Credit Union helps people avoid debt by encouraging saving and providing what it terms “responsible loans”. Anthony said: “We’re concerned rising bills will force more people to borrow from these lenders and so we’re working hard to encourage them to come to us first, an ethical and responsible not-for-profit cooperative which genuinely cares about their wellbeing.”

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Anthony noted that previously most loans had been for "specific things ... to cover the cost of large expenses such as home improvements, car repairs, a holiday or Christmas for example” but said that situation was changing.

A Credit Union can help people in debt cut the cost of paying back their loans by arranging to wrap existing debts into one consolidation loan.

Anthony said: “This pays off several smaller, but fast growing high interest, debts and replaces them with a single credit union loan at an affordable interest rate.“It’s really brave when someone comes to us with a number of debts and asks for a debt consolidation loan, but it’s so worthwhile when they feel the relief of straightening out their finances especially right now, in the face of inflation and rising costs.”

You can apply for membership if you live or work in the postcode areas: PR1 - PR5, FY1 - FY8 and LA1 - LA2.

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You can also become a member if your employer is a Payroll Partner.

To contact CLEVR money see, email [email protected] or call 01253 478 390 To see the CLEVR money website click here