Statistics show the number of people with guarantor loan debt has doubled in the last 26 months, prompting fears that debt is out of control for many people.
Figures from Citizens Advice highlight that more than 2,990 approached them for help with their problem loan repayments, and specifically guarantor loan repayments this year alone. Thousands more people sought help from the charity for other forms of financial issues – which again highlights that people’s financial woes are not getting any better.
Most people approaching the debt charity with guarantor loan problems said that it was the amount of interest that they were expected to pay that was proving an issue for them. Many people have also admitted that they are currently paying back double the initial amount they took out in the first place, and it is crippling them.
Thank Stella Creasy MP
Since the payday cap brought in by MPs like Stella Creasy, people that would have been able to get credit in their own names, now have to find a guarantor to help them. As we predicted many years ago, defaults on guarantor loans is much worse for debtors than any other type of credit product.
Despite the shocking figures clearly showing the amount of debt people are getting into, data also highlights that applications for these types of loans have risen by around 23 per cent in two years, meaning despite the dangers of not being able to afford repayments, people’s current financial situation is so dire that they are taking the risk and having the loans anyway as a quick fix to solve their monetary woes.
Naturally, some credit campaigners and debt charity advisers have called for an absolute ban on all types of high cost loans in a bid to lower the numbers of Britons falling into problem debt, but this simply isn’t ever going to come to fruition and will hurt the financially sensible in our society.
Rolling out a complete ban on these types of products would take away a viable option for people who come unstuck and need a quick fix – but are not regular debtors. People that are close to payday and receive a bill that they can’t pay would have options taken away from them through no fault of their own, for instance.
Getting rid of fast track loan services would penalise these people and would put them in a trickier financial position. The same goes for people with poor credit who struggle to get financial assistance elsewhere. Getting rid of guarantor loans completely would automatically leave them with no viable cash option and could potentially shove them into the path of loan sharks. Instead, wouldn’t it be much easier and much more prudent to educate people about the importance of only taking out loans that they can easily afford to pay back, rather than punishing everyone? Just a thought.