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NewsWhy I took out a payday loan - and why I never will again
Why I took out a payday loan - and why I never will again

A Wolverhampton City Credit Union member describes her brief encounter with a payday loan

What do you do when you’re a young single mum of one and you’re gradually sinking into debt?

It happened to me when my daughter was five. Shortly after moving into a new home I’d scrimped and saved to buy, our gas central heating was condemned. I sank the last of my savings into buying a new boiler: it was a cold winter and we couldn’t live without hot water and heating.  

Over the next few months, without a safety net of savings, I struggled to pay my mortgage, bills and childcare fees and keep my old banger on the road. The dream of home ownership was turning into a nightmare.

Things were getting desperate. The bank refused to extend my overdraft. I was too proud to turn to family for help - though they were similarly hard up. Everyday I put on a brave face, worked hard and tried to be a good mum. But every morning, I woke with a knot of tension in my stomach, a feeling of dread. I was becoming weighed down by worry, convinced my situation was hopeless.

Things came to a head one month when I’d spent all my salary in just two weeks, leaving me with nothing for food and petrol to get to work.

I was low as I could get.

Just across the road from where I worked, I had occasionally noticed the brash, bright posters of a high street payday lender. It’s not the kind of place I would have given a second thought to. But that day was different. My choice was stark: two weeks without food and petrol. Or some cash in hand, speedily organised.

Within an hour, I stepped into the winter sunshine with money in my pocket and new hope. Both the relief and the cash were short-lived. Like an addict, temporarily gratified with a fix, I would soon wake up to a harsh reality.

That evening, I started to work out how much I would be paying back through this short term loan. Until then, I never knew the significance of the annual percentage rate (APR). This is the amount the lender would charge if you borrowed the money for a year, as a percentage of the original loan.

The APR on my short term loan was shockingly high. When I added the repayments to my mounting bills, I knew I was staring into a deep chasm of debt.

I took a day off work and did what I should have done right at the very start - sought some expert debt advice. With the help of the adviser I sat down to work out all my bills and expenses. For the first time in my young adult life, I had a budget. I then prioritised my payments and rescheduled others to give me some breathing space. I knew it would be tough to stick to the plan: there would be next to no spare cash for non-essentials. But in just six months, I was virtually debt - and stress - free.

Arguably, the payday loan got me out of a fix. But I was desperate and unaware of the alternatives.

Fortunately, I learned, before it was too late, that if you’re already struggling with debt, short-term loans aren’t the answer. 

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