Most Pay day Loan Borrowers Earn Well Above National Average
has always been associated with extortionate interest rates, usury and loan sharks in trench coats wielding baseball bats. Even UK MPs, who are supposed to be more intelligent than average Joe Bloggs, tell sob stories of their poor unemployed or low income constituents struggling to repay £200 loan. Child molesters probably enjoy better reputation than pay day loan lenders, even though they act according to present law and even sponsor public events and football teams every now and again. As usually, reality is stranger than fiction and facts seem to rain heavily on the parade of payday loan opponents. According to recent study by Instant Loans Direct, which analysed information about 75,000 of their clients, a whooping 57% payday loan borrowers earn between £25,000 and £50,000 per annum. This means that a significant majority of people applying for payday loans earn more than national average salary, sometimes nearly twice as much.
This is a stark contrast to a hostile propaganda of the most vocal opponents of pay day loan, who claim that payday loan borrowers are “financially distressed” and “in trouble because of high cost credit”. This rhetoric maybe useful for winning votes in Walthamstow, but statistics paint a completely different picture. Consumer Finance Association, which represents UK payday loan lenders insists that UK consumer credit regulation standards is much higher than any other country in the world. All UK pay day loan lenders and brokers must obtain a licence from the Office of Fair Trading before commencing trading and must comply with strict UK and EU credit legislation, which even regulates the size of the font used to display the APR of a loan. Payday loans are only available to those UK residents who have a steady job, a bank account and enough disposable income to be able to afford to repay a payday loan with interest at the end of the month.
Some anti-pay day loan activists demand introduction of interest rate caps. Such caps were introduced in several other countries and US states, but instead of making payday loans cheaper, they simply made them unavailable. This pushed consumers into the hands of illegal or unlicenced providers or made them miss their rent or mortgage payments, incurring penalty fees which make interest payable on payday loans pale in comparison. Taking away choices is not a feature of 21st century market economy – less choice and more government regulation always ends up harming customers.
Pay day loan.