IN these tough economic times, sadly, financial worries are becoming a growing reality for a number of people in Carmarthen as they struggle to make ends meet. With more and more people relying on consumer debt management services and payday loans to get by, it is surprising that many people in Carmarthen are still unaware that they can access financial advice which can make the crucial difference between allowing a difficult situation to spiral into unmanageable debt and regaining control of your finances.
Every day, credit unions across Wales see the price people pay when they have borrowed from payday and doorstep lenders. Just one example is a mother of three from Kidwelly who borrowed £300 from a doorstep lender and now owes £720.
Payday loans are small, short-term unsecured loans designed to tide people over until they get paid. If the money is paid back promptly on the next payday, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge. However, if the loan — some charging interest rates of more than 4,000 per cent — is rolled over, debts can quickly escalate. You can easily get into a cycle where you're just paying off little amounts thinking its manageable, not realising you're racking it up.
While payday and doorstep lenders can charge hundreds and sometimes thousands of per cent interest and charges (APR) for loans, credit union interest rates are capped by law to a maximum APR of 26.8 per cent. A £300 loan from a credit union would save a borrower £200 or more on the cost of a typical payday or doorstep loan.
Borrowers would then be encouraged to use some of that difference to start saving: not all of it, just £2 or £3 per week. It means that by the time the loan is paid off, they have a pot of about £50 which can make all the difference to their confidence and self-esteem. That way being a member of a credit union is a great way for people to save a little and at the same time access credit when they need it on a more sustainable footing.
Loans issued through credit unions are insured by the organisations and unlike banks, credit unions are not driven by profit and can give financial assistance to people who would not normally receive support from high street lenders.
Unfortunately many people in Carmarthen still seem to be choosing payday and doorstep lenders, however, the credit union alternative is slowly gathering pace.
Credit unions also offer banking services with many accounts coming with a debit card, which can be used in shops and to withdraw money from cash machines, and account holders will be able to set up standing orders and direct debits. And as Money Saving Expert's Martin Lewis says, they aren't just an oasis for those struggling to qualify for high street borrowing. Credit unions appeal to those who want to bank ethically and benefit their community, and some larger credit unions can even offer products that can beat mainstream finance.
So whether you are facing financial burdens or just fancy banking more ethically, maybe its time to consider a real alternative on your doorstep — your local credit union.
You can find your local credit union at Save-easy Llanelli & District Credit Union Ltd, 6-8 Bridge Street, Llanelli, 01554 770867.