Christmas is coming. Shops are looking to drain every last penny from their customers, and payday loan companies are happy to provide you with a boost of money to spend... for a price.
A new report from the Office of Fair Trading says most payday lenders do not follow rules put in place to protect customers. A payday loan is a short-term loan, with the money often provided within an hour of applying for it. The APR interest rates can be as high as 4248%, leaving customers paying through the nose when repayment day comes. According to a study by R3, an estimated 5 million Brits are considering taking out a payday loan in the next six months.
Last year the average cost of Christmas in the UK was estimated to be around £600, with poorer families spending nearly £200. An estimated one in three people went into debt to pay for it. Getting a case of the January bills blues isn't unheard of, but what if you'd funded Christmas on payday loans alone? The absolute lowest estimated gift budget for an “acceptable Christmas” was £113.43 (of course many people spend hundreds of pounds more than that!). Wonga.com proudly proclaims that it could lend you that sum in 20 minutes. Come January 1st however, you would have to repay £166, an increase of 46% over 40 days.
There is a huge amount of pressure on people to buy the best Christmas presents, especially for parents. If you don't have a lot of money for gifts this year, try to find a way to minimise your costs and avoid going into debt at all costs. If you can't afford something now, how will you afford it next year?
A couple of ideas to reduce the costs of Christmas:
- Talk to family and friends about your gift budget. Everyone is feeling the strain of the recession, so they might be grateful you brought it up!
- Have a chat with older kids about trying to save money. They might even have some ideas to help you out!
- Buy cheap crafting supplies for younger children and spend time with them making Christmas decorations or art for your walls!
- Shop second hand. Always a bit controversial, but consider a quality second hand gift from ebay or even a charity shop. You might find the perfect board game for the kids or handbag for mum. Just make sure there are no stains, it doesn't smell weird, etc.!
- Homemade gifts are brilliant! There are thousands of websites full of ideas to pick from, such as this one or this one. Why not make a big batch of truffles or try the fake Ferrero Rocher I made last year?
The most important thing you can do is spend time with your loved ones. Focus on your traditions and festive-but-free activities that will keep the kids entertained! Give yourself the best possible start to 2013!
Have you ever been a victim to what MP Stella Creasy has dubbed "legal loan sharks"? How do you plan on saving money this Christmas?