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All budgets are subject to close scrutiny about who wins and who loses. The recent budget will be no exception. One of the most positive aspects of the budget was the proposal to provide more help for those struggling with problem debt.
0% Loans Instead of Payday Lenders
Part of the proposal was the idea of providing interest free loans to those on low incomes. Such people often struggle to make ends meet. They can also struggle to obtain credit at anywhere near the rates obtainable by the better off. This can make them easy targets for payday lenders and loan sharks, who are prepared to lend them money, but at expensive rates of interest.
With the worst deals often being the only resort to the worst off, it’s easy to see how this idea could improve the lives of the most financially vulnerable. How it will work in practice remains to be seen.
Whilst still at the proposal stage in the UK, it’s worth noting that a similar scheme has already been put into operation Australia and has resulted in four out of five people moving away from payday lenders.
At the time of writing, it appears that the government will consult with banks and leading debt charities and undergo a feasibility study at some point next year.
Extra Breathing Space For Those In Debt
Another of the more positive parts of the 2018 budget is the proposal to put in place a breathing space for those with unmanageable debt of 60 days. This is an increase on the original proposal that suggested 6 weeks. This would be a period when those in financial difficulty will have protection from legal action by their creditors with the aim of using this time to get their finances back under control.
How Will This Affect Payday Lenders?
There is always going to be a place for businesses who are able to provide quick, short term loans for those who need them. However, the proposals in the budget make it clear that the Government wants to provide protection to those members of society who it feels are being exploited because of their need for credit.
Payday Lenders have had to modify their business model a lot over the last few years and the need for this is set to continue. The proposals in the 2018 budget, if enacted, will hopefully lead to a fairer deal for those who use payday lenders and offer a genuine alternative for those who would otherwise have no other choice.