Banks, payday lenders and the not for profit alternative

I NOTICED a post this morning that Natwest and RBS are to close more banks in the UK and another five in the Aberdeen and Shire area. There have been more banks closing over the past 2 years than ever before. The banks are saying that the demand for online banking has increased etc etc. So, if the demand for online is increasing why are we seeing an increase in payday lenders on the high street along with other high interest types of organisations that started online but are venturing onto the high-street. We now we have more of this type of organisations than we have banks in the area.

Interest rates from these organisations are ranging from 112%APR to 1500% APR depending on what you are looking for. In the UK 1 in 5 people are regularly using payday lenders and the average UK debt has increased month on month for the past 2 years. Why? Because of the increase in revolving credit from short term lenders. It’s easy to get a loan but hard to get away from it. I had someone come in and speak to me recently that started innocently with £150 payday loan that they intended to pay straight back but as life goes on something else came up, so he ended up borrowing another £100 on top of the £150. A month goes by and his wages come in and he is expected to pay back £250 which he does but by week 2 after being paid he was back for more money to the payday lender. another series of events led to him going up to £500 of a payday loan. the expectation was that he would payback at the end of the month. I asked at this point how on a wage of roughly £1900 a month was he intending to pay what was £700 with the interest and that’s when he said that’s why I came to you. I’m not saying payday lending is bad as such as it can serve a purpose sometimes but what people do need to know is that there are alternatives out there. Since the banking crash of 2008 it has become harder and harder for people to get smaller loans from the bank, so a niche market was cultivated by payday lending. As they charged such high interest rates they could afford huge marketing campaigns. I said there are alternatives and indeed, we are one of 3 Credit Unions in Aberdeen who have members who save and take out loans. Unfortunately, too many people come to us once the horse has bolted as usually people have heard of a Credit Union but don't know what it is we do. Credit Unions are not for profit organisations. There are many other terminologies but that would be the most well-known one. We are currently trying to raise awareness of how Credit Unions are cheaper alternatives to Payday, Doorstop and Furniture lenders. We work with all kinds of organisations offering a payroll deduction service for employees along with financial awareness information.

If anyone wants to find out more our website (Still under construction) is or Facebook: The North East Scotland Credit Union or alternatively drop me a message to discuss further. We work with organisations from small 1 or 2-man organisations to the council and housing associations with thousands of employees. We work with people from young babies to retired and everyone in between.