It’s the typical story – payday on Friday and by Monday you’re skint. As a mum, the strains on your finances can seem endless – whether it’s for a birthday or a new pair of trainers. So, the promise of some quick and easy, short-term cash might seem like the ideal solution; but with interest as high as 4,000% for borrowing money in the short-term comes at a significant cost.
The Financial Ombudsman Service, the free service set up by law to look at money problems, is seeing more complaints about payday loans than ever before. MMM spoke to the service to see what you should look out for and what your rights are if you borrowed money, but things didn’t turn out quite right.
Read the T&C’s: As a busy mum, you may feel reading the small print is well down your list of priorities, but it’s important to take the time to read the T&C’s of a loan. While it can be tempting to sidestep the finer details when you need money in a hurry, remember that the interest rate and charges on a payday loan can be much higher than a traditional loan and you can end up repaying much more than you thought. Know what you’re signing up to and what you are expected to pay to avoid any nasty surprises.
Bogus brokers: You can apply for a payday loan online in minutes these days, but do you really know who you’re handing your details over to? Some websites out there look like payday lenders but are actually credit brokers – middle men who ask you to pay a fee in return for finding the cheapest loan rates available for you. Thousands of unsuspecting people have contacted the ombudsman to say that they’ve lost money after signing up to one of these sites and some of them never even received a loan. Always check why a website is asking for your personal information and make sure you’re happy before you click to confirm.
Regulated: If you do go through to borrow money, make sure the company you are borrowing money from is reputable and regulated by the Financial Conduct Authority. If they’re not, then it unlikely that you will be able to bring a complaint about them if something goes wrong. The good news is that most of the larger payday loans companies are regulated, but be careful if you are using a smaller lender as they may not be.
Difficulties: If you have a payday loan that you are struggling to repay, speak to the business who gave it to you, they may be able to help. A business is required to do something to help a customer who tells them they are in financial difficulties. There is no set ‘help’ that the business should offer and while it isn’t required to refund any charges, it should be able to implement a repayment plan or suspend interest on your account.
Think twice: Payday loans should always be treated with caution and if you find you’re struggling with everyday expenses, then they may not be the answer. There are other ways you can get help and find a long term solution to any money worries you have. Organisations such as StepChange debt charity can offer this advice for free on 0800 138 1111 or you can visit the Money Advice Service online. See MMM‘s article on debt here for more.
At the ombudsman, we hear from mums all year round who took out a payday loan as a desperate last resort and blame themselves when the debt starts to spiral out of control. But it’s important not to feel trapped with nowhere to turn because of the stigma associated with short-term lending.
Money problems affect everyone so don’t just stick your head in the sand if you’re in trouble – get in touch with the Financial Ombudsman Service straight away on 0300 123 9 123 or on Twitter @financialombuds and we’ll help you get things sorted out.