One in four borrowers gets a loan they can’t afford by not checking the cost

Nearly one in four people are using the internet and telephone to access high-cost short-term credit, with nearly half doing no research before taking a loan.

Worryingly, more than a quarter of people have no idea of the actual cost of the loan they take out, according to a study published today by My Home Finance, a national social lending organisation.

“An alarming culture has developed, where people think it’s perfectly acceptable not to check what the actual cost of the loan is; and worse – companies are lending to people without assessing if they can actually afford to repay the loan,” claimed Tess Pendle, chief executive of My Home Finance.

She is today launching an affordable finance awareness campaign in conjunction with housing associations, credit unions, community organisations and the Community Development Finance Association.

The organisations believe that there should be affordable lending available to all, and access to financial educational must be made a priority.

Ben Hughes, chief executive of the CDFA, said; “We should all have the basic right of access to fair finance. More people need to know about the affordable loans that are on offer and that won’t trap them in spirals of debt, and more investment is needed to link up community lending, savings and advice services.”

Ms Pendle added: “Nearly one in five people who took out a loan think it is absolutely normal to pay at least £780 back on a £300 loan. It isn’t, and it needs to stop.”