Credit union Kent Savers an alternative to 'irresponsible' payday loans
by business editor Trevor Sturgess
People needing quick loans to tide them over are being
encouraged to seek help from a Kent-based credit union rather than
face swingeing interest rates from "irresponsible" payday
Kent Savers was set up three years ago to provide finance to
people in Kent, Medway and Bexley.
It has since approved £1million in affordable loans with a
maximum interest rate of 26.8%, but often less.
The Office of Fair Trading this week denounced "widespread
irresponsible lending" by so-called payday loan firms. Many Kent
borrowers are burdened by huge debts, sometimes owing far more than
the original loan.
The OFT has given the biggest firms 12 weeks to change their
practices. But Kent Savers, authorised and regulated by the
Financial Services Authority, has warned that during that time,
"hundreds if not thousands of new people" will have taken out
additional loans with these firms.
It says it can help straight away, vowing never to sanction
loans to people who cannot afford to pay.
Borrowers and investors become members of the organisation, and
regular savers receive a share of any surplus. Kent Savers is part
of a nationwide credit union movement that now boasts more than a
million members - and no outside shareholders.
Borrowers who turned to Kent Savers instead of doorstep or pay
day lenders have saved many hundreds of pounds in interest, says
general manager Chris Hunt.
“Payday loans firms make their money from issuing loans at sky
high rates and then make more money by rolling over these loans
when people can’t afford to repay them on time.
“Credit unions will never charge more than 26.8% APR and often
less. Kent Savers aims to provide affordable loans to people
throughout Kent and Bexley, and not to make huge profits for our
Kent Savers claims that a £300 loan from a leading home credit
provider, repaid weekly over 52 weeks, could cost £246 in interest.
A similar sum from a credit union, charged at the current maximum
interest rate of 2% a month on the reducing balance, would cost no
more than £40 in interest, representing a saving of more than
Kent Savers is supported by the Department of Work and Pensions
growth fund, Kent County Council, district councils and housing