In the face of rising housing prices, renters and homeowners in Britain are finding it harder than ever to afford the cost of living. According to the BBC, almost two thirds of the UK’s population are struggling to pay their rent or mortgage. With banks tightening their lending criteria and offering borrowers little flexibility, the vast majority of the population who find themselves in this situation have few, if any, options. The fact is, you have to make your rent and mortgage repayments on time every month to keep your home.
Over the past year, almost one million people have turned to a payday loan to help them pay for their rent or mortgage, shows research conducted by the housing charity, Shelter. With banks offering little support or help to struggling lenders, this short term loan option gives borrowers an answer.
A payday loan is a small instant loan usually up to the value of about £500. They are specifically designed to offer customers who simply can’t make their money stretch any further a solution. By the time a person has paid all of their bills and living expenses, their mortgage repayment can seem impossible to afford.
Before the financial crisis, when banks were happy to throw their money at almost anybody, borrowers were given a lot of freedom in mortgage options. In hindsight, that was a huge mistake. But, it’s too late for that. Now, many borrowers who previously qualified for a loan are being punished for the bank’s mistakes and are caught up in the tussle between the government and banking institutions as to how to manage the UK’s debts.
At the EU Leaders Summit in December 2012, Chancellor George Osborne said that cleaning up the UK banks was the “trickiest area” for the Government to deal with.
“We have to try to return the banking system to health and get it working again,” he told the summit, as quoted by the Telegraph.
The government has to do this quickly, because according to the Shelter research, 1.4 million people have already fallen behind on repayments and are on the verge of losing their homes. And it appears that the only reason people are managing to stay afloat is thanks to quick, payday loans, rather than their bank’s support.
“It’s shocking to think that so many families will be starting the new year with a huge weight hanging over them, trapped in a daily struggle to keep their home,” Shelter’s chief executive, Campbell Robb said.
While payday loans aren’t a long-term solution to financial troubles, they can give people that little bit of extra time to organise a longstanding resolution, so they don’t have to put their home at risk.