The Glen Development Initiative are advising the people of Derry to be wary of so-called ‘Pay Day loan’ companies.
And one local advisor, Peter Hollingsworth, has also warned that “what started as a £50 loan can quickly turn into a £5,000 problem”.
Bronagh McCallion, a Development Officer with GDI, based out of the Glenview Community Centre said: “Pay Day loans are short-term loans but people aren’t paying them back which means the interest is going up and up and they’re getting into more debt.
“These companies can access your bank account, and if they’re taking money out of your account which you don’t have, it means that you’re not only creating debts with them but with the bank too.”
Peter Hollingsworth, the Strategy Manager for the city’s Outer West area, said the issue was originally raised in the Health Forum.
“We’ve all been in that situation where you might need a few quid until Friday but if you borrow it and don’t pay it back then it escalates and you end up with a problem that might affect your health.”
Bronagh said; “These loans are the cause of stress and mental health problems, especially with young people, so that’s very much a concern as well.
“Because the loans are so readily available, these companies are becoming almost acceptable. Every time you turn on the TV you’re bombarded with them and people are thinking ‘that sounds like a great idea’.
“But the reality is that some of these companies have collectors that will come to your work or your home.
“Someone in the family mightn’t have said they’ve had a loan, and it could have an impact on the entire family.
“If you have guarantors or have put down references then they can contact them and that’s adding more stress again.”
Bronagh said she’d heard of people accessing loans on mobiles while out drinking, and then getting money from an ATM.
“The problem has been about for a while but it’s been especially noticeable since the economic downturn. These companies know that people are under pressure with money, they’re saying this is a quick fix for them and that’s how they’re selling it to people.
“They’re also selling these to students and to people with disabilities, and this could affect their benefits.
“Young people especially aren’t realising that if they’re not paying the debt off in time, this could affect their credit rating down the line if they want to get a credit card or are looking to get a mortgage. ”
Peter said: “The message we want to get out from the Health Forum is that people should be a bit more thoughtful and research the process a bit further. At its best, it probably does exactly what it says on the tin and it is a short term loan, but people just need to take more personal responsiblity and consider the consequences of these short term loans and what can happen.”