Payday Loans are the Hit and Run of Financial Products
Press Release - 18 July 2012
Millions of people are risking their financial future by taking out payday loans - even if they pay them off on time.
GE Money has confirmed it will no longer consider applicants who have taken out a short-term, high-interest loan once in the past three months or more than twice in the past year.
In further evidence that payday borrowing can impact a person’s ability to use other financial products in the future, Experian is now specifically listing payday loans separately. Previously it provided a more generalised overview of a person’s borrowing history.
The developments mean consumers need to be even more cautious about the financial products they choose, or risk compromising the choices available to them in the future.
Amigo Loans, which lends flexibly at 100th of the APR of some payday lenders, says GE’s decision to exclude mortgage applications from people who have had a payday loan is further evidence of the destabilising and potentially devastating effect payday borrowing may have.
Amigo’s founder and CEO, James Benamor, says:
While it is not fair that banks have stopped lending to good people, consumers need to be made aware that there are other safer and cheaper options beyond payday. This is the strongest sign yet that other financial services providers are recognising the ‘hit and run’ effect that payday lending has and the destabilising risks it brings. The likes of Wonga can spend millions on advertising and glossy marketing because they charge the earth. Consumers need to be aware there are better options available to them, so that they can avoid a financial nightmare with long-lasting, devastating consequences.
While there are often genuine reasons why people need to borrow quickly, using payday loans could cause serious problems in the future for millions of consumers. But, taking out and paying back longer-term loans and credit cards has always been considered one of the best ways to rebuild a damaged credit score.