Younger borrowers are more likely to use payday loans and are unaware of ‘more affordable’ credit unions

Young people are twice as likely to use high-interest payday lenders than nonprofit community lenders, according to a government-backed Money and Pensions Service study.

Friends and family are the largest source of funding for the 25-34 year old group, with 26% saying they rely on ‘close contacts’.

Meanwhile, 19% said they would consider a payday lender or other high-cost short-term credit if needed.

Only 5% of respondents said they would consider borrowing from non-profit lenders such as credit unions.

There are 7.7 million economically vulnerable adults in the UK, nearly half of them aged 25-34.

In addition, the non-profit financial organization Fair4All estimates that there are 7.7 million people aged 18 to 34 in financially vulnerable situations, outstripping the estimated 17.6 million adults living in these situations. accounts for almost half of

Fair4All Finance’s Lauren Peel told This Money:

“But they have goals and are ambitious about where they want to live and what career they want to be.

“A lot of them are renters, and it’s not always a stable market.

What are credit unions and community lenders?

A credit union is a financial cooperative that provides savings, loans, and various other services to its members. To join, credit unions typically require members to be part of a common bond, such as living within a designated area or working for a particular employer.

However, you do not necessarily have to be a current union member to use the service.

These organizations are often able to lend money to their customers on more favorable terms than other high street lenders, leaving vulnerable borrowers who may struggle to access credit elsewhere. We have prepared a scheme to support you.

36-year-old Victoria Barry was caught by a payday lender in her early twenties, but was able to pay off her debt with help from her credit union and is now a homeowner.

36-year-old Victoria Barry was caught by a payday lender in her early twenties, but was able to pay off her debt with help from her credit union and is now a homeowner.

In her early twenties, Victoria Barry found herself in a vicious cycle of taking out expensive payday loans.

Speaking to This is Money, the Manchester native, now 36, initially borrowed just £20 from a payday lender after a friend suggested she finance a night out at the end of the month. Plagued by high interest rates, Victoria continued to supplement her salary with loans at the end of the month.

It got to the point where she had to pay almost all of her salary back to her payday lender every month and get another loan to live on. The crisis came when borrowing exceeded income, she says.

“My next payment was going to be money that wasn’t in my account,” she recalls. “My salary was only £10,500 and I had borrowed £700 the previous month. I had £150 in interest and there was no way I could give them that money.

At the time, Victoria was working for Co-op Insurance and noticed an advertisement for the credit union on the workplace intranet.

“It was so shameful. My family is not in debt. So I felt like I let people down and didn’t want to rely on them. I saw it.” [credit union adverts] On my intranet, I thought I’d give this a try.

It was such a shame. My family is not in debt.

She says she was worried union staff would point out her mismanagement of her money, but when she met her advisors face-to-face, they were relieved and helped.

Not only did they provide her with an affordable repayment plan, but they also provided her with financial health tools, such as budgeting skills, to help her manage her money.

“No one can tell you how to budget. says Victoria.

“The most important thing for me at the time was the case that someone was listening to you and not judging you.

“Looking back on those days, it seemed hopeless, so if someone like me hears that someone can help you, I am happy to share my story. Worth it.

What else can I do if I need credit?

The first thing Peel suggests is to see if you’re eligible for any benefits you haven’t claimed yet.

If you have access to other sources of income, there are online tools to help. It is estimated that around £15 billion in profits are unclaimed each year.

Don’t be shy when you need credit, she says. Do your research and make sure you approach financial providers who can help you find low-cost options.

High-cost payday lenders often appear high in search engine results, so take some time to find one that is available and affordable.

Victoria Barry has a message that if you’re in a difficult financial situation, don’t be shy about asking for help.

She suggests consulting a credit union, but even if they can’t help you, they’ll be able to point you in the right direction for alternative help.

“Getting help is the first step,” she says.

According to a Bluestone Mortgages survey, one in six adults (16%) say they are embarrassed to ask for help when they are in financial difficulty.

However, a greater barrier to getting advice is that about a third (31%) believe they are not eligible for help, and more than a fifth (22%) They say they don’t know where to turn for help. .

To raise awareness, credit unions and other local lenders encourage young people in their 20s and 30s to consider their credit choices and choose from a variety of local and national locations that fit their financial situation. We encourage you to consider the options available through your lender.

they can be found at Find a credit union – Local credit unions and Finding Finance – responsible finance A provider of simple, low-cost and affordable loans.

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