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Short Term Loans Best Option?

Written By On 07/04/2014

For those in need of paying a bill ASAP, short term loans tend to be two times more popular to take out rather than approaching a credit union, according to a recent survey.

The new report conducted by the insolvency trade body R3 consisted of over two thousand candidates. Four per cent owned up to taking out a short term loan within the last six months, whilst half of that figure revealed they had chosen credit unions for their support.

The report also revealed that around eight per cent from both sexes thought it extremely possible that they will opt for a short term loan within the next six months to help them through financial hardship.

The survey also pointed out that more than one in four adults in the UK find it a financial battle just to get to their next payday.

This particular sector say that the three main factors contributing to their struggles are the costs of food, closely followed by electricity and gas overheads, with transport expenses not too far behind them.

R3's deputy vice president Phillip Sykes feels that credit unions are still a long way behind short term loans as far as the people's choice goes.

Mr Sykes commented:

Payday loans have become one of the default options for those trying to tide themselves over from one month to the next, but there really do need to be alternatives. While high cost, short term credit might be helpful in some circumstances, payday loans are not a long term option. They only dig people struggling with debts into deeper holes.

However because credit unions are greatly staffed by volunteers, the consensus of opinion is that advertising would not be cost effective. If they were to advertise more to compete against payday lenders, then they would have no choice but to raise their interest charges to cover the extra costs, thereby having an adverse effect.