Those who are struggling to get credit through conventional methods due to their financial situation are turning to other options available to them, it has been suggested.
According to Frances Walker of Credit Action, people are beginning to use pay-day loans, logbook loans and pawn brokers in order to acquire finance.
These sources are being used by so-called ‘Funts’ – or financial untouchables – who have had difficulty getting finance from regular lenders due to their debt.
Ms Walker noted that the poorer a person is, the harder it can be for them to obtain credit.
“I am sympathetic if people are very desperate and just need cash and I understand why they turn to someone like a pay-day lender,” she explained, but added that taking such action – for example to try and avoid bankruptcy – can be “very expensive” due to the high rates of interest.
Recent research by Abbey Credit Cards found that one in ten of the UK’s population are spending 90 per cent of their salary on essentials such as rent and bills.
By Tom Musk