Economic and Social Research Council
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High cost credit first option for many

High-cost loans such as home credit, doorstep loans and hire purchase are far more widely used than pay day loans, shows Welsh study.

Pay day loans receive a great deal of publicity, but a recent study by The Young Foundation working with the Welsh Government finds that other forms of credit – home credit or doorstep loans and rent-to-own (hire purchase) – are far more widely used yet have received far less scrutiny.

Research into high-cost credit across Wales found it to have a negative impact on people's wellbeing. Half of those taking out high-cost loans experience anxiety and stress as a result of this debt. So why choose such costly credit, and what are the alternatives?

Findings reveal that almost two thirds of people (65 per cent) turn straight to high-cost credit without considering different types of credit or comparing offers between lenders. More than 70 per cent of high-cost credit customers think that these types of borrowing are normal. And, as hire purchase and doorstep loans have largely avoided negative publicity, they are seen as acceptable choices.

Based on conversations with 100 customers and 26 stakeholders, The Young Foundation recommendations include greater regulatory support and use of social finance to fund innovation. They also advise steps to expand affordable finance through, for example, new consumer credit, savings products and strengthening credit unions.

Further information

This article was published in the Summer 2017 issue of the Society Now magazine.


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