Many people will not be sorry to hear that Britain’s biggest payday lender, QuickQuid, is to close, just over a year after the sector’s best-known player, Wonga, collapsed. But if you urgently need a bit of cash for a short period, where can you turn?
CashEuroNet UK, which operates the QuickQuid brand, stopped lending after Grant Thornton, the accountancy firm, was appointed as its administrator on Friday.
In recent years, millions of people have turned to payday loans to help meet their housing costs, deal with an unexpected emergency or even afford their weekly food shop.
But while these quick, short-term loans can sometimes feel like the only option for those with cashflow problems, there may be more affordable alternatives out there, says the Money and Pensions Service, which brings together the services delivered by the Money Advice Service, the Pensions Advisory Service and Pension Wise.
If you need to borrow a small-ish amount for a short period, what are your choices? That is assuming that other options, such as a loan or handout from family or friends, or asking your employer for an advance, aren’t forthcoming?
• An authorised overdraft. Designed for short-term borrowing, but costs vary dramatically. Some banks have daily fees, some monthly, some charge interest, and some use a combination of these. However, many banks are currently changing their pricing before the introduction of new rules taking effect in April 2020, designed to make overdrafts simpler, fairer and cheaper.
Borrowing £250 via an authorised overdraft over 31 days would cost a Barclays standard account holder £23.25 (31 lots of 75p a day), while for a standard NatWest customer it is £9.88 (£6 monthly fee and £3.88 interest). With Nationwide’s FlexAccount it’s £3.70 interest before 11 November, rising to £7.22 after that, while at app-based bank Monzo it’s £15.50 (50p a day).
• Credit unions. These have long been touted as a vital alternative to payday lenders, and can offer a very good deal for borrowing smaller amounts. The maximum they are allowed to charge is 3% a month, though some charge less. If you borrowed £250 from London Mutual Credit Union for a month, you would pay back £257.50 – that is £7.50 interest (though same-day payment adds an extra £11). But it may not always be easy to quickly join a credit union and get cash fast – some may require you to build up some savings first.
• Payday lenders. There are still plenty of other payday firms plying for trade – but they can be very pricey. If you took out a £250 loan for one month from Peachy, for example, it would charge £62 interest – that is, the total you would repay is £312.
• Other lenders. With a company called Creditspring, you pay a membership fee and can then borrow £250 twice a year at 0% interest. Each £250 advance is paid back in four monthly instalments of £62.50, along with your £6 monthly fee. But that means the total cost of credit is £72 a year.
