Credit unions offer ‘ethical’ loans to beat payday lenders

A group of London-based credit unions have joined forces to offer “ethical” short-term loans at a fraction of the rates of payday lenders.

The seven not-for-profit lenders have created the online JustBorrow loan, which has an APR of 42.6 per cent compared with annual interest rates of more than 1,000 per cent offered by many payday lenders.

The loans can be for amounts from £100 to £750 and repaid over three to six months.

A £500 loan repaid over six months would cost £64.80 in interest and fees compared with up to £500 charged by a typical payday lender.

Ravi Ravindran, chief executive of Lewisham Plus, one of the seven credit unions, said: “Christmas is an expensive time of year and with budgets tighter than ever, for many, taking out a loan is the only way to spread the costs.

“Unfortunately, increasing numbers are turning to expensive online lenders that end up costing hundreds of pounds in interest and leaving households with a festive financial hangover.”

Londoners take out about 800,000 short-term loans a year.