Payday loans are an expensive form of borrowing. The debt charity Step Change advises against them and the Financial Conduct Authority has recently tightened up its regulations concerning these lenders. There are alternatives that are worth considering if you need access to credit.
One of the easiest ways of getting credit is to apply for a secured loan against your vehicle is to take out a logbook loan. Lenders like CCP offer up to 75% of the value of your car. During the life of the loan, ownership is transferred to the lender through your logbook until the loan is repaid.
To apply for a loan your car must be under 10 years old and not be subject to a finance agreement. Depending on the value of your car and your needs you can borrow up to £50,000 but it’s important to assess whether you can afford the interest repayments as well as the sum of money that you’ve borrowed.
Many of those who have used payday lending in the past have been forced to use this resource as a result of a poor credit history. An article in The Guardian highlights the need for lenders that will cater for this market and suggests that Community Development Finance Institutions (CDFIs) might be an answer. These institutions are usually social enterprises that can charge high rates of interest, to cover their risk, but will look at customers that can’t get an overdraft or loan from a bank. All sizes of loans are catered for from £100 to a larger amount. Customers will also receive financial advice from CDFIs.
If you’re in paid employment you may be able to ask your company for a loan. After all, your employer probably knows you far better than an anonymous credit score rating and may be inclined to trust you with a loan. There’s the added incentive that if you want to retain your employment you will repay the loan.
If you are need of a loan and have assets then you can always raise funds quickly at your local pawnbrokers. A recent story in The Hull Daily Mail highlights the fact that your assets don’t have to be traditional. Laptops, signed T-shirts, fishing gear and musical instruments all have a value. ‘Some of the more unusual items … include a giant replica of the Statue of Liberty, boxing gloves worn by Oscar de la Hoya and a five man canoe.’ You can either sell your goods at a pawnshop or simply raise a loan.
The bank of mum and dad
One of the cheapest and safest ways to raise funds in an emergency is to ask your parents. If they are in a position to help they’ll probably prefer that you asked them rather than going to an alternative lender. It’s always best to draw up some form of written contract so that everyone is clear about the terms and conditions of the loan.