Beware of ‘Supersize’ Payday Loans: 8 Million Brits have taken out a Payday Loan in disguise
Press Release - 18 November 2013
- Providers marketing ‘one year loans’ are the preferred alternative lending option for Brits – one in ten has taken one out
- Yet a third (29%) admit they don’t know how they differ from a payday loan
- A wolf in sheep's clothing: borrowing £500 loan would cost £949 - almost double
- Consumers beware of #supersizepayday
Amigo Loans is warning against a new wave of short-term, high-APR lenders appearing in the market. Often billed as an alternative to payday, these new lenders are offering ’supersized payday loans’ which actually end up being more expensive, as customers borrow even greater amounts for longer periods.
According to the latest research from one of the UK’s leading guarantor loan providers, these supersize payday loans top the list as the preferred alternative lending option for consumers, and a whopping 8 million Brits have already taken one out1. Yet its investigations reveal these supersize loans can be more costly and dangerous than consumer may think. Sometimes marketed as ’12 month loans’, borrowers taking out a £500 with these products can end up repaying £949 at the end of term - almost double the amount initially borrowed2.
People also appear confused about what so-called ‘one year loans’ actually are. A third (29%) aren’t sure or don’t know of the difference between a ‘one year loan’ and a ‘payday loan', and of the 8 million Brits who have already taken out what they believe to be a ‘one year loan’, 13% admit they actually don’t know or aren’t sure of the difference.
James Benamor, founder and CEO of Amigo Loans comments:
"The lending industry seems to go from one set of crooks to another, but actually these are big corporate organisations. Many of them are owned by the same companies behind payday loans with sky high APRs and hidden charges. ‘Pounds to Pocket’, for example, is owned by ‘CashEuroNetUK’ that also runs by ‘Quick Quid’, while recently launched ‘Satsuma’ is owned by ‘Provident Financial’. They are essentially trying to rebrand as something different to work around the system and skirt the new regulations."
James Benamor concluded:
“It’s a real worry that such a large number of consumers have taken out a supersize payday loan, and even more so when you consider the number who have committed to one without actually understanding what they are and how expensive they can be. More needs to be done urgently to educate people on these loans and the cheaper and healthier alternatives."
Amigo Loans’ lending is based on trust, personal endorsement and one-to-one interviews offering loans using friends and family as guarantors. An Amigo loan actually gives borrowers with bad credit the opportunity to build or rebuild their credit score, as opposed to destroying it through the use of payday loans. Interest is calculated daily, there are no charges or fees for early or late repayment, and it can work out thousands of pounds cheaper than regularly using payday lenders.
Notes to editors
1 Research carried out on 25 October 2013 by One Poll of 2,000 UK adults
There are 50,371,000 adults in the UK, according to the ONS Population Projection for 2013. 8% of this figure is 4,029,680 = 8 million
2 Desk research conducted by Amigo Loans on 22 October 2013 highlighting the cost of borrowing £500 over twelve months:
|Loan type||Company||Amount borrowed||Repayments (months)||Total repayment|
|‘One year’ loan||Pounds 2 Pocket||£500||12||£949.01|
|Guarantor loan||Amigo Loans||£500||12||£618.36|
Consumers taking out a £500 loan with a one year lender (Pounds 2 Pocket) will repay £949 at the end of the team - almost double the amount initially borrowed.