Pay Day Loans

[Rincewind]

Would a bank give a loan to someone who had lost their job 3 months previous and wanted the money to pay off missed HP installments for a car and a 50" plasma TV and a months mortgage arrears?

[Sir Fynwy]

Is there any reason these people aren't taking out actual loans with banks then? I work for a bank and exposure to people not managing finances responsibly just irks me.

'Stereotypical clients' doesn't even come into it, I don't care who takes them out, they're well known to be the worst option for solving any sort of financial problems you have. It's not an option, it's a PAYDAY loan. It's like fat people or smokers blaming shops for selling them the cause of their problems.

One situation I have seen was a company director earning £250k per year who lost his job because the company lost a legal case and was liquidated, he had a large but easily manageable mortgage until he lost his job, tried selling the house to downsize but the market was going slow, took some payday loans to cover short term mortgage payments and no bank would touch an unemployed ex-director. If he'd manage to find a buyer in a reasonable time he'd have been ok and is back in a highly paid job now but in between he has lost his property and was bankrupted by a payday company.

Yes he could have tried to rent the place out but by the time he realised he was in serious trouble it was too late. Banks are great at hanging people out to dry if they don't meet specific lending criteria

[Haydos]

I'm surprised that you work for a bank and yet still ask that question...

 

Up until now I've had nothing but vague descriptions of 'educated people'.

[Rincewind]

My income went from over £250 pw to £72. A big drop and if I had not had help in budgeting my money would have run out last July. If I managed to find a job I would have been OK for a while longer. I never got to the stage of considering a Payday loan because I had family support but there are many others that do not so this thread is for them not only saying stay clear of them but trying to show there are alternatives.

[Strokes]

Just spoke to a mate and he was saying if wasn't for this facility he may not have been able to work. He says he lost his temporary job and then got offered a full time position a week later. Trouble was he had to go from weekly pay to monthly pay, whilst also paying childcare. He said this helped and he was clear in two months, so maybe its not all so bad.

[Sir Fynwy]

Up until now I've had nothing but vague descriptions of 'educated people'.

It's not really acceptable to give many details but how about PhD level educated working in the education sector? This is an actual example.

[Sir Fynwy]

Just spoke to a mate and he was saying if wasn't for this facility he may not have been able to work. He says he lost his temporary job and then got offered a full time position a week later. Trouble was he had to go from weekly pay to monthly pay, whilst also paying childcare. He said this helped and he was clear in two months, so maybe its not all so bad.

Short term loans aren't a problem in themselves, it is punitive interest rates (which the government is proposing kerbing) that are a problem.

[Rincewind]

Yes that is the right way to use them. But will they tell you that at the time? They will just see $$$$$$$ and increased interest payments if you say you do not have  set time to repay. The setting up of the loan should be looked at and maybe stricter without completely doing away with them. The idiots will still borrow whether its them or a shark. Although prevention is better.

[ADK]

There's a big list of better ways of borrowing money than pay day loans.

[MooseBreath]

One situation I have seen was a company director earning £250k per year who lost his job because the company lost a legal case and was liquidated, he had a large but easily manageable mortgage until he lost his job, tried selling the house to downsize but the market was going slow, took some payday loans to cover short term mortgage payments and no bank would touch an unemployed ex-director. If he'd manage to find a buyer in a reasonable time he'd have been ok and is back in a highly paid job now but in between he has lost his property and was bankrupted by a payday company.

Yes he could have tried to rent the place out but by the time he realised he was in serious trouble it was too late. Banks are great at hanging people out to dry if they don't meet specific lending criteria

I'm sure people like him are in the minority when it comes to those using pay day loans, but even so, that's an interesting story. A few thoughts spring to mind though. Why hadn't this well paid man put aside a healthy emergency fund like any sensible person? Had he no savings whatsoever? If he had struggled to sell the house for some time and had failed to get a new job in the same, what made him think the odds were in his favour when he gambled on a pay day loan? Why did he not already have lines of much cheaper credit open such as a credit card or overdraft? Why didn't he look at renting the place out? It does seem like he made a series of very poor decisions. I guess it just goes to show that book smarts and or high earnings don't mean you can't be a dumb old fool every now and again.

[Sir Fynwy]

I'm sure people like him are in the minority when it comes to those using pay day loans, but even so, that's an interesting story. A few thoughts spring to mind though. Why hadn't this well paid man put aside a healthy emergency fund like any sensible person? Had he no savings whatsoever? If he had struggled to sell the house for some time and had failed to get a new job in the same, what made him think the odds were in his favour when he gambled on a pay day loan? Why did he not already have lines of much cheaper credit open such as a credit card or overdraft? Why didn't he look at renting the place out? It does seem like he made a series of very poor decisions. I guess it just goes to show that book smarts and or high earnings don't mean you can't be a dumb old fool every now and again.

Why do 40% of all premier league players end up going bankrupt in retirement? Lots of People live a lifestyle that matches their income and if that income disappears they can struggle. Plenty of contracted outlay cannot be renegotiate in the short term, kids in £25,000/year private schools, car finance, cards that you keep maxed out etc. It doesn't take much imagination to come up with really good reasons why people can't get decent short term credit.

[Haydos]

One situation I have seen was a company director earning £250k per year who lost his job because the company lost a legal case and was liquidated, he had a large but easily manageable mortgage until he lost his job, tried selling the house to downsize but the market was going slow, took some payday loans to cover short term mortgage payments and no bank would touch an unemployed ex-director. If he'd manage to find a buyer in a reasonable time he'd have been ok and is back in a highly paid job now but in between he has lost his property and was bankrupted by a payday company.

Yes he could have tried to rent the place out but by the time he realised he was in serious trouble it was too late. Banks are great at hanging people out to dry if they don't meet specific lending criteria

 

So he had no savings to cover those payments in the first place and being out of work thought a payday loan would be the best option, knowing he couldn't afford the repayments? Again I might be jumping to conclusions but shouldn't someone with a big mortgage and other financial commitments not be living on the edge like that. 

 

Maybe in his particular situation (knowing he would probably be employed in a well paid job again sometime soon), being chased by payday companies was his best option.

 

Out of interest, what would he (or what do you think) he would have done if these companies didn't exist?

[Haydos]

It's not really acceptable to give many details but how about PhD level educated working in the education sector? This is an actual example.

 

Sorry, It wasn't supposed to be a dig at you, just a reply to a smart arse comment. I don't deal in depth with customers in financial difficulty and I'm pretty young so i'm ignorant to how people are getting into these situations.

[Haydos]

Why do 40% of all premier league players end up going bankrupt in retirement? Lots of People live a lifestyle that matches their income and if that income disappears they can struggle. Plenty of contracted outlay cannot be renegotiate in the short term, kids in £25,000/year private schools, car finance, cards that you keep maxed out etc. It doesn't take much imagination to come up with really good reasons why people can't get decent short term credit.

 

Only just seen Moose's reply and I kind of share the sentiments. Footballers that go bankrupt are just as deserving. It's not like they are short of time to plan for the future. They have access to financial advice and the ability to afford investments that 99.9% of the population can't.

 

There's a lot of feeling sorry for people that are in these situations when although they may have had a lot of bad luck like your friend, they have contributed heavily to the situation themselves.

[Haydos]

Also, apologies for spamming replies, you make a lot points that make for decent discussion that's all

[Sir Fynwy]

I have no ****ing clue why he didn't have saving, all I know is that he was before the courts and lost his property because of some bad decisions and losing a seriously well paid job, the witness statements don't tell you a defendants whole life story. Plenty of businesses live on or just beyond the edge as do lots of people.

If there was no payday lending I guess he would have rented the place out or handed the keys back but again that is pure conjecture and backed into a corner potentially neither of those would have saved him from bankruptcy. If properly regulated as proposed and maximum repayments become 2x initial loan value fewer people will be in such a position but I'm sure that there will be far fewer companies offering the loans as well.

[MooseBreath]

Why do 40% of all premier league players end up going bankrupt in retirement? Lots of People live a lifestyle that matches their income and if that income disappears they can struggle. Plenty of can't racted outlay cannot be renegotiate in the short term, kids in £25,000/year private schools, car finance, cards that you keep maxed out etc. It doesn't take much imagination to come up with really good reasons why people can't get decent short term credit.

Footballers go bankrupt because they are idiots who make very poor financial decisions. Chief among them I suppose the decision to live extravagant lifestyles on what are for the majority of professional footballers quite low incomes when you consider how short their careers are. Likewise the chap in your story has failed to adequately plan for the kind of risk to our income that the vast majority of us face. His not planning for that is his fault. You can't blame pay day loan companies because people get themselves in such a mess that they become the best option available.

[Sir Fynwy]

Footballers go bankrupt because they are idiots who make very poor financial decisions. Chief among them I suppose the decision to live extravagant lifestyles on what are for the majority of professional footballers quite low incomes when you consider how short their careers are. Likewise the chap in your story has failed to adequately plan for the kind of risk to our income that the vast majority of us face. His not planning for that is his fault. You can't blame pay day loan companies because people get themselves in such a mess that they become the best option available.

So I guess you've planned for every possible eventuality in your life and have no chance of ever being strapped for cash? My old man was MD of a Division of the largest manufacturing company in the UK through his 40's until he retired at 52 but in his mid 30's he had 4 years of little work and eventually had to leave us to work in Hong Kong for a while to get back on his feet. There will always be people who have bad luck which no amount of sensible planning could mitigate, sneery I'm all right jack crap just means more people will be hoping you are the recipient of some tough times.

[MooseBreath]

So I guess you've planned for every possible eventuality in your life and have no chance of ever being strapped for cash? My old man was MD of a Division of the largest manufacturing company in the UK through his 40's until he retired at 52 but in his mid 30's he had 4 years of little work and eventually had to leave us to work in Hong Kong for a while to get back on his feet. There will always be people who have bad luck which no amount of sensible planning could mitigate, sneery I'm all right jack crap just means more people will be hoping you are the recipient of some tough times.

Not intending to be sneery in the slightest. I have had tough times and am in no doubt that more tough times are always just around the corner. They happen to most of us but we don't all end up with spiralling debts to pay day lenders. Why is that, do you think? I don't think the amount of thought and planning required to avoid such a situation is a such a big ask. If you haven't bothered to do it, then it is your fault, not the fault of pay day loan companies. People are always trying to blame others for their problems. You can be very unlucky in life but that doesn't give you an excuse to blame other people for bad decisions you made, and in the context of this topic, it doesn't mean the whole market should suffer from the withdrawal of a service that many find useful and acceptable.

[Rincewind]

I am not calling for the withdrawal of the service nor was that blokes son just a fairer way so those who have not had the education or have the mental capacity to cope. Something like a mental breakdown can affect anyone. I know people who have had them anf although it has gone and they seem OK stress ora tragedy can trigger it. There are people who have had relationship breakdown and it hits them hard. They hold emotions in until they snap. Combine this with the stress of job loss job searching and being chased for money it is unlikely that there would be rational thinking. It is not a case of blame but causes and events piling on top of each other. Abusive childhood care home bullying things most people do not have to deal with. Some maybe able to break the chain at some point but if a child is sexually abused do you blame them as adults? The reason why their mind is unbalanced is because they blame themselves for it.

We all react to different situations. There are of course times when we should take responsibility for our actions but also times praise or a helping hand does wonders. With regards to payday loans education and prevention rather than shrugging the shoulders and saying I know what they are like so they should too.

[Rincewind]

Someone I know was a teacher then owned B and B hotels and rented houses out. He is 65 in September and he will be drawing a teachers pension. He says he is not elligble for state pension yet he says his savings will not last if he lives to the expected lifespan. He has two properties and even though he is a mathematician and can manage accounts to the point of giving advice in his spare time his savings will dy up before he does when he will have to take pension credits. So he has said he can be frugal and hope he lives to be 100 or spen without going too mad his savings on holidays etc. As he said if he goes tomorrow then he wont need the pension. So no matter how you save or plan your savings will not last a life time so make the most of it.

[Sir Fynwy]

Someone I know was a teacher then owned B and B hotels and rented houses out. He is 65 in September and he will be drawing a teachers pension. He says he is not elligble for state pension yet he says his savings will not last if he lives to the expected lifespan. He has two properties and even though he is a mathematician and can manage accounts to the point of giving advice in his spare time his savings will dy up before he does when he will have to take pension credits. So he has said he can be frugal and hope he lives to be 100 or spen without going too mad his savings on holidays etc. As he said if he goes tomorrow then he wont need the pension. So no matter how you save or plan your savings will not last a life time so make the most of it.

Won't his teaching pension run for the rest of his natural life? He will also be eligible for a basic state pension. Little chance he'll get pension credits with the property he has. Sounds like he's planned quite well for retirement and doesn't need any help.

[MooseBreath]

Won't his teaching pension run for the rest of his natural life? He will also be eligible for a basic state pension. Little chance he'll get pension credits with the property he has. Sounds like he's planned quite well for retirement and doesn't need any help.

Agreed, sounds like he'll be fine. A teachers pension, a 2nd property to rent out or sell and the state pension or pension credits to fall back on. Not sure what relevance this story is supposed to have to the topic, ken?

[Rincewind]

Won't his teaching pension run for the rest of his natural life? He will also be eligible for a basic state pension. Little chance he'll get pension credits with the property he has. Sounds like he's planned quite well for retirement and doesn't need any help.

Yes it will but it wont be a massive amount He has in fact been sort of retired for the last few years after he sold the hotel. He plays oker so invests a lot in that. His missus does the pccasional marking for an exam board. What he was saying is he is actually dipping into his savings slowly but at some point they will be at the level where he can claim. Think he said 6 grand a year. or more. He has not been claiming any benefits while he has not been working, He's been South America China and most places. What I am saying that unless the pension equals your salary now and increases with inflation most people savings will not las if your lifestyle stays the same. I look on retirement as doing things you could not before. Within reason of course because you live on borrowed time 70 onwards and younger for some.

[Sir Fynwy]

Yes it will but it wont be a massive amount He has in fact been sort of retired for the last few years after he sold the hotel. He plays oker so invests a lot in that. His missus does the pccasional marking for an exam board. What he was saying is he is actually dipping into his savings slowly but at some point they will be at the level where he can claim. Think he said 6 grand a year. or more. He has not been claiming any benefits while he has not been working, He's been South America China and most places. What I am saying that unless the pension equals your salary now and increases with inflation most people savings will not las if your lifestyle stays the same. I look on retirement as doing things you could not before. Within reason of course because you live on borrowed time 70 onwards and younger for some.

What? This is incoherent nonsense, anyone with any sense knows they will have less income in retirement than they did when working. You may maintain a lifestyle because you have lower costs (paid of mortgage, lower travel costs etc).