People across Scotland are being urged to avoid debt misery this New Year by considering their local credit union if they need to borrow money.
The warning comes as many Scots will be feeling the pinch following Christmas with credit card bills arriving on top of regular monthly payments, adding to increased financial stress.
Such financial pressures are often made worse at this time of year, with many Scots struggling to manage their money until January’s payday, which often isn’t until the end of the month.
As a result people throughout Scotland will be faced with the difficult decision to borrow money with many seeing payday loans as a quick fix to solve their festive debt. However, such creditors often charge interest rates of over 5,000% APR.
This is a huge figure when compared to credit unions, which are restricted by law to lending at a maximum of 2% per month (26.8% APR), with many offering lower preferential rates.
Enterprise Minister Fergus Ewing, said: “After Christmas many people can find themselves in financial difficulty as the cost of the festive period mounts up and bills start to arrive. The Scottish Government is very concerned about the growth of payday lending and the impact this is having on people in Scotland, especially on people who are struggling financially as a result of the Christmas period.
“January is traditionally a tough month, and we want people in Scotland to be aware that there are other options if they are struggling financially.
“Credit unions are available to people throughout Scotland and offer a range of loan products at manageable rates of interest and affordable repayment options, many within a short timescale.”
Recent figures from charity Step Change found that Scotland has the highest volume of payday lending in the UK with almost one in five clients at the charity having at least one payday loan.
With over 100 credit unions throughout Scotland, everybody has access to ethical, affordable credit and should consider them when looking at their financial options.
Allison Barnes, Scotland manager at Money Advice Service, said: “From our annual Christmas survey, we know that one third (35%) of adults in Scotland will pay for the festivities using credit cards and 6% admit they plan to turn to payday loans to cover the cost of Christmas.
“Payday loans are one way of getting cash fast but they do come with risks. No one should borrow from a payday lender unless they are 100% confident they can repay the cash on time.
“This is why we are supporting the Scottish Government’s 12 Days of Debtmas campaign which is encouraging people to look at alternatives to payday loans along with the benefits of saving with a Credit Union.”