Is short term lending the devil?
We don’t necessarily think so – but we do strongly believe it depends on the reason for borrowing, along with other factors like cost and affordability.
People borrow money short term all the time and for all sorts of reasons, and while some borrow from their own savings accounts (perhaps they repay it later and perhaps they don’t), from friends or whānau, others may not have that same ability and must find alternative sources of funding.
An overdraft or other bank lending typically starts off with good short term intentions, but as we see so often these loan arrangements tend to become “comfortable” with customers, and banks make small but continued profits as a result. Just like a credit card, the issuers of these products encourage repayment of the minimum payment only when the customer would be far better off making the maximum payment that they can afford at every opportunity, saving themselves a small fortune in the process.
Real Finance strongly opposes the extended use of high cost credit – some pay day lenders were charging upwards of 500% per annum, only to be strictly reined in by legislation to a still high 0.8% per day, limited to 100% of the original loan amount – and as a way to break the cycle that many find themselves in (where they repay a high cost credit loan to find themselves without any money left over and a need to borrow again and again, losing ground each time) by offering our existing clients access to cheaper short term lending, when they find themselves in an emergency situation.
As all consumer lending proposals must be tested for affordability and be fit for purpose, Real Finance has a legal obligation to ensure that even these short term loans are provided in a responsible manner. We take our obligations very seriously, and may ask for new documents to make certain the repayment of these loans will be unlikely to cause the borrower to suffer financial hardship by repaying the debt.
If you are a current borrower of short term lending and you are finding yourself struggling to meet repayment obligations, or taking money from other parts of your budget to repay loans, it may be time to have a member of our team look into a debt consolidation loan – where your debts are rolled into one loan, repayable over a longer period than the short term lending which allows you to have a better budget and spend your own money instead of borrowing more, and more often. Then if you do have an emergency, we will always have that option of a small short term loan to fall back on aswell.
Our team can be contacted on 0800 21 21 21, or via email if you would like to find out more about how Real Finance can help you today.