Emergency Borrowing

Type ‘Emergency Borrowing’ into Google and you will be SWAMPED with offers from Pay Day loan companies guaranteeing QUICK CASH 

Payday loan rates are now capped at 0.8% of the amount borrowed with a £15 cap on default charges but we still don't recommend them

You DO have other options, Credit Unions MUST have a 42.6% APR or less, Personal loans can have as little as 5% and some credit cards have long periods of 0% interest

 

Need to know

BUT there are BETTER options!

So, you urgently need cash… what now?

  • Firstly don't panic, there ARE lots of options - the draw of a Pay Day Loan is that it is immediate cash, some of these other (better) options are also quick but others like the Budgeting Loan do take a little longer
  • If you are looking to get a Pay Day Loan to pay a bill call the company you owe first, regulated energy and credit companies MUST help you set up a payment plan to pay what you can afford
  • If you can't afford to do your grocery shop because of unexpected costs there should be a food bank in your area or close by
  • If an essential white good, like a fridge or a washing machine, has broken and you can't afford to buy a new one visit your local Citizens Advice Bureau which can put you in touch with local charities that will be able to help
  • Avoid the cycle of debt. CUT BACK just for a bit, solve this problem before it gets worse and THEN you can go back to normal
  • Make sure you’re not over spending on ANYTHING including bills and insurance. Have a look at our BIG WINS to see where you can SAVE CASH EASILY
  • Protect your credit rating. It may not be your top concern now, but a poor credit rating means you won’t be able to get the best deals on your mobile and your energy bills, as well as ruining chances for future borrowing including a mortgage
 

Payday Loan Changes 2015

While we would never advise you undertake high interest short term lending, if you absolutely have to get a payday loan they are a better proposition than they were in 2014. New rules enforced by the FCA have come into play since the 1st January, meaning that rates of interest are now capped. It means that:

  • You can now only be charged 0.8% a day interest and fees
  • Default fees will be capped at £15
  • You can only ever be charged a maximum of 100% of what you borrowed (if you borrowed £100 you would only ever have to pay back £200).

These changes should stop people from falling into insurmountable levels of debt and should have been implemented long ago. Better late than never!

 

How to borrow

FRIENDS AND FAMILY, an interest free loan is ALWAYS your best option. Set up a PAYMENT PLAN with your 'lender' so you both know how and when it will be paid back and then STICK TO IT. Too many family feuds begin because of money lending…

IF YOU ARE A STUDENT talk to your University, they have money set aside to help students in financial trouble and may be able to offer you an emergency loan which will be processed very quickly

TALK TO YOUR BANK they may be able to extend your overdraft, which is likely to happen on the same day after a quick check. If you need an interest free overdraft consider switching your current account, which will take 7 days BUT even if they adverstise an overdraft, you will have to be approved to get the largest amount

CREDIT RATING, recent reports suggest that taking out a payday loan is viewed negatively by some mortgage lenders, EVEN if you pay it back on time. It could stop you getting a mortgage.  Applying for too many forms of credit in a year can also damage your credit rating, so check what borrowing power you have before you start applying. You can check quickly and FOR FREE using the 30 day trial of credit expert

Credit Expert


Why we like it:

  • free trial for 30 days
  • allows you to make changes
  • very comprehensive

Watch out:

  • it can be a faff to apply - they may send you a PIN number in the post to give you access
  • you need to remember to cancel the free trial after you have your report
  • you can only cancel by phone

Credit Unions

CREDIT UNIONS are a good option for those who have been declined credit elsewhere. They offer small loans with interest that cannot by law exceed an APR of 42.6%.

They are not for profit organisations where members save and borrow money. You are very likely to find one that services the local area- for example the Ealing Credit Union can be joined by residents of Ealing. Your professional union may also offer credit. UNITE the UK’s biggest trade union has recently started offering credit.

With some unions you need to have been a member for several months before you can borrow, others will let you apply for a loan straight away. Loans can take as little as 3 working days to process but we found the average amount of time for a Credit Union application is 5 working days

The Credit Unions all vary, some will let you apply online, others over the phone. You are likely to need proof of address, a couple of months of bank statements and a recent pay slip

Association of British Credit Unions Ltd


Why we like it:

  • quick postcode search that will show you your closest Credit Union
  • clearly displays Unions info, phone number and opening times
  • displays institutions supported by FSCS

Watch out:

  • Credit Unions will have different rates
  • Credit Unions may not have websites

If you are on Benefits

IF YOU ARE ON BENEFITS OR A LOW INCOME the Social Fund may be able to help. Interest free budgeting loans can be offered via the Jobcentre where the loan is paid and then the amount is gradually subtracted from your benefits to pay it back. Once you send off your application you will have a decision in 3 weeks, although Jobcentre has told us that the whole process from starting the application to getting your money normally takes 5 weeks.

Also check in with your local Citizen’s Advice Bureau for local charities that may be able to help with one off essential costs like a fridge or washing machine

Department for Work and Pensions


Why we like it:

  • guide to the Social Fund
  • more information on Budgeting Loans and how they work
  • more information on other parts of the Social Fund including grants

Watch out:

  • if you are looking for where to apply for a Budgeting Loan it is your local Jobcentre

Citizens Advice Bureau


Why we like it:

  • will direct you to local charities that may be able to help with furniture or similar
  • talk face to face with your local advisor
  • more debt advice

Watch out:

  • check you're using the right country, this will link to the England specific site, check top left corner to switch to Scotland, Wales or N.I

Loans and Credit cards

PERSONAL LOANS a  loan from a bank or building society is often the cheapest way to borrow figures of £5000 plus. If you have a poor credit rating you may still be able to borrow by using a guarantor (often a parent) who guarantees your loan. They would then have to pay it back if you default. One of the best places to start is your own bank. If you are applying on your own you will generally be able to get an instant decision online

CREDIT CARDS often cause debt, but, if used correctly, they can help you solve a financial situation. If you have to buy something consider putting it on a purchase credit card to spread the cost, if you are paying off credit card debt a balance transfer credit card will help, you can also use a super balance transfer credit card to help you get out of your overdraft. If you are applying online you will recieve an instant decision

Purchase Credit Cards


Why we like it:

  • Can spread the cost of a purchase

Watch out:

  • Don't get in more debt by not repaying or borrowing more than you can afford

Balance Transfer Cards


Why we like it:

  • Transfer a high interest debt to a 0% interest card

Watch out:

  • Don't get in more debt by not repaying or borrowing more than you can afford

Super Balance Transfer Cards


Why we like it:

  • Transfer a high interest debt to a 0% interest card including overdrafts and bank balances

Watch out:

  • Don't get in more debt by not repaying or borrowing more than you can afford

The BIG wins

We’re all about saving lots of money QUICKLY and EASILY. These may not get you out of a financial bind straight away, but they will DEFINITELY help in the long run

ENERGY save £200+ by switching to a fixed rate energy tariff (this takes 5 minutes)

MORTGAGE save thousands in interest by making sure you switch your Mortgage when the deal has ended, to get yourself another low interest period

CAR INSURANCE shop around, play with the variables and NEVER let your insurance auto-renew. This saves people an average of £375!

SELL BEFORE YOU BUY the average household has £1045 of unused but sellable items just lying about the house

BUDGET BUDGET BUDGET know what you’ve got coming in and going out, if you’re frequently finding yourself in the red see where you can cut back, your food shopping for example, is a very easy place to save

 

The inside track

  • We really can't stress enough how important the other options are, BUT if you REALLY do feel like a Pay Day loan is your only option, choose the best of a bad bunch and make sure it's OFT registered. 
  • If you already have a Pay day Loan and are having trouble paying it off PLEASE DON'T BORROW MORE as this never ends well.  Contact the lender as they have to make reasonable allowances to help you pay them back. The Citizen's Advice Bureau has a great video on your rights with Pay Day Loans.
  • If Pay Day loans are evil then Loan Sharks are the devil incarnate! PLEASE GO NOWHERE NEAR THEM.  Don’t borrow from an institution which is not licensed and regulated- unless it’s your mum!
  • Are you entitled to benefits?  If you have children and you and your partner earn under £50,000 individually, the answer is almost definitely yes. You may also be eligible if you are on a low income. Have a look at GOV.UK’s benefits calculator.

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