Need a loan of € 250? Here are some options if you are broke | Loan and debt

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If you were having a bad financial time and urgently needed £ 250 for a short time, where would you go?

In recent years, millions of people have turned to payday loans to pay their rent or mortgage, deal with an unforeseen emergency, or even afford their weekly groceries.

But now Wonga is gone, and this week it emerged that the company’s biggest surviving rival faces a multi-million pound bill after being hit by a deluge of complaints.

Payday lenders often argue that they are providing a vital service to those who would otherwise have trouble accessing credit – but some of those in need of a quick cash shot may have better options, such as getting credit. help from family or friends, ask their employer for an advance, talk to their bank about an overdraft or a loan from a credit union.

Meanwhile, as pointed out by the Money Advice Service, if you don’t have the money you need until payday, a credit card can give you extra wiggle room – but, of course, if you don’t solve your debt in the end of each month, you will usually have to pay interest on your outstanding balance, and it can really add up.

Earlier this month, a short-term lender called Creditspring kicked off a new concept – you pay a membership fee and have access to interest-free loans.

So if you have to borrow those £ 250 for a month, what are your choices, assuming other options such as a document from family or friends are not available? Be aware that these products all work in different ways so, strictly speaking, the results are not directly comparable.

An authorized overdraft These are designed for short term borrowing, but costs vary enormously. Some banks charge a daily fee, some charge a monthly fee, some charge interest, and some use a combination of these.

Borrowing £ 250 on a 31-day authorized overdraft would cost a Barclays standard account holder £ 23.25 (31 lots of 75 pence per day), whereas for a standard Halifax customer, it is £ 11.15 (a daily charge of 1 pence for every £ 7 you borrow). With Nationwide FlexAccount, it’s £ 3.70 in interest.

Needless to say, overdraft without authorization can be horribly expensive. For example, in the scenario allowed above, the TSB would charge £ 9.31 (£ 3.31 interest and £ 6 monthly usage fee) – but if that wasn’t allowed it would be £ 80 (maximum monthly TSB charge).

Credit unions These have long been presented as a vital alternative to payday lenders and can offer a very good deal to people who borrow smaller amounts. The maximum they are allowed to charge is 3% per month on the declining balance – an APR of 42.6%. Owned and controlled by their members, credit unions have traditionally specialized in lending and saving for the less well off, but increasingly target people of all incomes.

If you borrowed £ 250 from London Mutual Credit Union for a month, you would pay back £ 257.50 i.e. £ 7.50 interest. If you borrowed £ 250 for two months you would pay back two lots of £ 130.65 i.e. £ 11.30 interest. At Leeds Credit Union it’s a similar story: pay £ 4.65 or £ 7.50 for a loan of £ 250 for one month, or £ 8.41 or £ 11.30 over two months.

But anecdotal evidence suggests that it’s not always easy to join a credit union quickly and get money fast – some will require you to accumulate savings first. A March 2018 report by debt charity StepChange said there were sometimes geographic or practical barriers to accessing credit unions, and added that between 50% and 80% of those applying to borrow from them are refused for not being solvent, depending on the risk of the individual organization. appetite.

Source of credit The lender went live this month and claims to offer a new way to deal with unexpected expenses. People pay a membership fee and can then borrow £ 250 up to twice a year at 0% interest. Each £ 250 advance is repaid in four monthly installments of £ 62.50 plus a monthly charge of £ 6. But that means the total cost of credit is £ 72 (a representative APR of 87.4%, indicates the website). Some may think it’s a lot to shell out for just £ 250 or £ 500. Additionally, Creditspring is limited to those with an annual income of over £ 20,000 and you must be a member for 14 days before you can draw your first advance.

Payday lenders Wonga may now be a former lender, but there are still many other payday companies crisscrossing the business.

If you took a £ 250 loan for a month from QuickQuid, which is arguably the UK’s largest payday lender, you would be charged £ 60 interest – that is, the total you would pay back is £ 310. If you borrowed £ 250 for two months you would pay £ 120 interest.

A number of other payday lenders would also charge £ 60 for those £ 250 for a month. Peachy said he would charge £ 58.

Payday loan price comparison websites, such as Allthelenders, allow you to compare offers.

Other lenders There are alternatives – social enterprises such as Fair Finance, which has several branches in London, don’t quite fit the above scenario as it has a minimum loan term of six months. His website suggests that a person borrowing £ 250 over this period would pay around £ 100 (made up of £ 70 interest and £ 30 administration fee), making a total to be repaid of £ 350 (this assumes monthly repayments).

His APR representative title is 109.6% and he concedes: “Our loans are more expensive than a loan from a bank or a credit union.”

New lenders exploiting the market gap left by Wonga’s demise include Amigo and Oakam, according to Labor MP Stella Creasy.

Amigo allows applicants to borrow over a period of one to five years at a representative APR of 49.9% even if they have a bad credit rating, provided they provide a guarantor. However, the minimum loan is £ 500. Someone who borrows over 12 months would repay £ 618.36.

Meanwhile, Oakam allows people to borrow from £ 200 to £ 1,750 and pay it back over three to 12 months – so again, that doesn’t quite fit the scenario. If you borrowed £ 250 over three months, you would pay back £ 362.14. This is a representative APR of 1,584.5%.

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