Interest rates are at their lowest point ever recorded by the Bank of England – down from 5.75% in December 2007 to 0.5% today. Surely it figures that the cost of borrowing is now the lowest is has ever been too? Well, no – unfortunately that’s not the case. Take a look at some interest rates you can find if you browse the web for a few seconds:
|
Provider |
Rate |
|
Payday UK |
1737% APR |
|
Quickquid |
2222% APR |
|
Wonga |
2689% APR |
sourced from providers website – 18-1-10
These rates are 100% genuine (look them up) and these organisations, and many like them, are used by many people in our communities every day to borrow small amounts of money. If you aren’t borrowing from these lenders then it’s likely you will know someone who is.
These payday loan products are designed to be repaid over a short period of time so it’s possibly a bit unfair to focus on them in isolation – lets look at some loans available which are repaid over a longer period of time – and once again, these are real examples of credit that are used regularly by many people in our communities:
|
Provider |
Rate |
|
Shopacheck |
254.5% APR |
|
Provident Personal Credit |
272.2% APR |
|
Greenwood Personal Credit |
433.4% APR |
sourced from providers website – 18-1-10
You might not have heard of these organisations but many people reading this will be regular customers. Take Provident Financial for example – In June 2009 they had over 2 million customers, in the first 6 months of 2009 they made profits of more than £53 million.
These are ‘sub prime’ loans though. Surely credit cards or store cards are a lot cheaper? Well yes, but:
|
Provider |
Rate |
|
Vanquis Bank Visa |
39.9% APR |
|
Capital One Classic Visa |
34.9% APR |
|
Dorothy Perkins Store Card |
29.9% APR |
sourced from Moneyfacts - January 10
Considering the Bank of England base rate is currently at 0.5%, it’s still not exactly cheap. It’s not really that surprising that many politicians are demanding a cap on interest rates which could see maximum annual rates set at levels of 15% – 20% which are common in many other European countries.
The UK Government rejected calls for a cap on interest rates in October 2009, following calls by MPs on Westminster’s Scottish Affairs Committee. The Government stated that any cap would not be welcomed as it could encourage illegal lending.
Whether that’s true or not, I think it’s safe to say that these high interest rates will be around for some time – the Bank of England base rate can’t get much lower and there is no appetite by the Government to enforce lower rates. If you are a borrower, shop around a bit and get the best rate you can. The following rates are available locally:
|
Provider |
Rate |
|
Western Isles Credit Union Loyalty Loan |
12.7% APR |
|
RBS Personal Loan |
12.9% APR |
|
Clydesdale Bank Loan |
13.9% APR |
sourced from Moneyfacts - January 10
(£6,000 over 36 months)
In January 2010, Credit Action reported that the average interest rate on Credit Card lending is 18.3%. Just look at the savings that could be made by moving a £6,000 balance from a typical Credit Card to a Western Isles Credit Union Loyalty Loan:
|
|
Amount |
APR |
Term |
Monthly cost |
Total interest |
Saving |
|
Typical Credit Card Debt
|
£6,000 |
18.3% |
3 years |
£213.69 |
£1,692.78 |
|
|
WICU loyalty loan |
£6,000 |
12.7% |
3 years |
£199.29 |
£1,172.29 |
£520.49 |
Everyone borrows at some point in their lives – it’s a necessary part of the society we live in today. Next time you are tempted to borrow, ensure you look for the most cost effective way to do so.
Just 36 months after it first opened its doors, Western Isles Credit Union has loaned more than one million pounds to its members.
The Credit Union offers loans from £100 to £7,000 at competitive rates from as low as 12.7% APR and can be a more affordable source of credit than the traditional lenders on the islands, particularly catalogues, store cards and credit cards.
David Mackay, General Manager of Western Isles Credit Union, said:
”I am delighted that the Credit Union has reached this fantastic milestone in such a short period of time. Considering it’s our members’ savings that are used to provide loans, this demonstrates the difference that can be made by the people in our communities working together to help each other. The Credit Union is now an integral part of our communities and without it many of our members would be dependent on much higher cost lenders”.
The Credit Union sector is particularly vibrant in Scotland with 113 Credit Unions and 250,000 members. Western Isles Credit Union is one of the youngest Credit Unions in the Country and already has 1200 members which is half-way towards its long term aspiration for 1 in 10 residents of the Western Isles to be members.
Western Isles Credit Union is a member-owned financial co-operative which offers a genuine ethical alternative to High Street Banks. It provides a range of savings products and competitive affordable credit to anyone who lives or works in the Western Isles.
For further information, call the Credit Union on 01851 701865.
07 September 2010
