Leeds Credit Union has launched a £10 million Christmas loan fund in a bid to prevent locals from going into debt with high-interest lenders.
The union has been offering Christmas loans for a number of years and hopes to stamp out dependency on predatory lenders at a particularly expensive time of year.
Payday and doorstep lenders are popular for their accessibility with some promising instant cash loans within 15 minutes of applying. But the high interest rates leave borrowers struggling to pay the loans back. Banks typically grant loans of at least £1,000 and it is difficult to take out a loan with poor credit or a low income.
By offering loans that are quick, flexible and easy to access, the credit union hopes to strike a happy medium between the two. Its loans begin at £250 and can be paid off over a time period that best suits the customer.
Leeds Credit Union is a government regulated, not for profit organisation that offers ethical lending to residents of West Yorkshire. Founded in 1987, it is the largest credit union in the country and boasts a membership of 37,000.
As with other credit unions it is owned by its members and legally cannot charge more than 3% interest monthly or 26.6% a year APR on loans, while payday lenders often charge upwards of 1,000% APR in line with the FCA’s price cap. Loans with a guarantor are slightly less at 49.9% APR (Source: GuarantorLoanComparison). All interest collected is reinvested into the union and benefits members rather than shareholders.
Members can borrow money from the pool but will not be granted loans that they cannot afford to repay.
In 2017, the Yorkshire Evening Post reported that Leeds Credit Union had lent £3.2 million over November, December and January and saved an estimated £1.6 million in interest payments. A further benefit is that as a community organisation, the money stays in Leeds and the pockets of locals.
Chris Smyth, chief executive of Leeds Credit Union, said: “This Christmas, we are more determined than ever to ensure that people across the region who require financial assistance stay away from disreputable payday or doorstep lenders, who have no interest in the wellbeing of customers nor their ability to afford repayments.
“As such, we have committed to lend more money this period than ever before and would urge people thinking of taking out a loan this Christmas to come to us first and be safe in knowledge we put their best interests before profit, both this festive period and beyond.”
People across Leeds, Wakefield, Harrogate and Craven are eligible for the loan.
The last day to apply in time for Christmas is Thursday, December 13.