50% of Borrowers Rely on Doorstep Loans
The Office of Fair Trading released some rather shocking statistics this morning. It says that half of all borrowers depend upon high cost loans simply to survive. This information comes just two weeks before Christmas, in what promises to be a very expensive festive period for many.
The OFT’s research found that 52% of people who borrow money are dependent upon some form of doorstep lending, which typically comes associated with astronomical interest rates of anywhere between 50 and 500% and it’s this type of borrowing that has huge potential to spiral beyond any control. A quarter of those people also admit to using doorstep lending on a ‘continuous basis,’ some continuing to lend to pay back what has already been borrowed.
Doorstep loans often involve small loans, usually around £300. These loans are always unsecured and the repayments aremade in weekly installments, to an agent who calls at house of the borrower to pick the money up. The nature of the loans and their often very high interest rates means they often come under scrutiny.
The Office of Fair Trading research also found that 26% of borrowers rely on credit cards and that 19% rely on store cards.
While the overall amount of credit has dropped slightly over recent months, something that suggests that the British consumers are tightening their belts in light of the recession, the number of people using these high cost loans is something of a worry to Consumer Minister Kevin Brennan, who said, ‘I’m concerned that so many people are relying on this form of high-cost lending.’
Christmas, in particular, can be an expensive time of year. Our tips on how to avoid Christmas debt may help to cut your credit need!