Short-term lender offers 0% interest loans to members
A lender offering interest-free loans in return for a membership fee has launched this month, giving people in need of a cash injection an alternative to payday loans.
Creditspring customers pay £6 a month and can borrow £250 up to twice a year at 0% interest. Each loan is paid back in four monthly instalments of £62.50 plus the membership fee.
According to its website, its representative APR is 87.4% fixed.
Loans are available to people over 18 with a minimum annual income of £20,000. You have to be a member for 14 days before you can draw your first advance.
The firm, which calls itself an “ethical” lender, says it offers a “much simpler” and “better value” approach than “most overdrafts, credit cards or payday loans”.
Last month, the UK’s biggest payday lender Wonga collapsed following a surge in customer compensation claims.
Payday lenders have long been criticised for charging exorbitant rates of interest and high one-off fees to struggling borrowers.
Neil Kadagathur, co-founder and chief executive of Creditspring, said: “Credit in this country is broken. 40% of people in Britain – more than 17 million adults – have no financial safety net, yet the products they have to fall back on range from the complex and expensive to the downright toxic and financially disastrous.
“It is immoral that just when the consumer is on their back foot financially, the industry – from major high street banks through to the shoddiest of payday lenders – choose to inflict their most outrageous charges for the privilege of being pushed into financial quicksand.”
Sue Anderson of debt charity StepChange said: “When presented with new forms of borrowing, it’s important people delve under the surface to see how the real costs compare to other forms of traditional borrowing.”
Top tips when taking out a loan:
- Shop around – research what’s on offer and get advice.
- Look at the total amount you’ll have to repay – a shorter repayment period may be better than a lower APR amount.
- Never borrow on the spur of the moment.
- Be careful about signing up to interest free deals. They’re only interest free if you pay them off within a certain time period. If you don’t pay them off within this period, you will pay a very high rate of interest.
- Work out your budget before you borrow to make sure you can afford the repayments.
- Be careful about borrowing more money to pay off existing debts. This can often lead to more serious longer-term problems.
Source: Citizens Advice