The cost of living crisis has created financial headaches for a Lancashire health worker who was ‘rescued’ by a credit union
What was initially a small debt on a credit card has grown and grown.
Not knowing where to turn to pay the bills, the solution seemed to be to ask for loan after loan.
County Credit Union CLEVR Money explained how the worker, who was paying gas for work and claiming mileage expenses, got into deeper and deeper debt.
A spokesman for the credit union which serves Preston, Blackpool, Fylde, Wyre and Lancaster, said: ‘Due to rising fuel prices their petrol has increased by around £15 a week. This, along with other increases in food and household bills, was more than they could afford, so they paid for petrol using a credit card.
Although the worker knew they would recoup some of the fuel cost in labor expenses, there was often a delay of one month to six weeks in claiming and being paid. Meanwhile, mileage reimbursement charges had not increased to cover higher fuel prices, leaving the worker with a shortfall in recent months.
When factored in with existing credit card debt, plus general debt and fees to buy now to pay for purchases later, the worker was struggling to pay £365 a month in repayments.
Simply put, the money wasn’t there after paying rent and household bills and the worker turned to a credit card again, this time to pay for everyday items, still accumulating more high-interest debt.
That’s when they started applying for payday loans online. After applying for 11 loans over three months, the worker realized that it really didn’t fit and didn’t move them forward, but by then their credit rating had been hit by so many applications.
A turning point came when they applied for a £1,000 loan through the CLEVR Money website.
The worker, who wishes to remain anonymous, said: “This loan will change my life for the better. I can focus on things and sleep and not worry about my working day and where I have to go. travel to do my job.”
Loans Manager Anthony Brookes reviewed the loan application and saw the repeat requests and called to find out what was going on.
He said: “I saw the numbers and just picked up the phone I could see they were freaking out with 11 applications in three months. As none progressed they seemed to realize that that wasn’t the answer, but I could tell they didn’t know what to do. When we spoke, they were so nervous and worried that we were turning them down. I could hear the relief in their voices when I said that we could help, and we could do better than they expected.
Anthony reviewed expenses and reimbursements. He said a £5,500 debt consolidation loan would pay off existing credit cards and store cards, leaving the worried worker with just one loan with a lower repayment than before.
The new £5,500 loan is repaid over 36 months at £175.18 per month with an interest rate of 9.5% APR, meaning a total of £6,306.48 will be repaid. This compares to their existing repayments of £365 a month which went to six lenders. This totaled £5,250 of debt which kept growing due to dramatically higher interest rates.
There is a long way to go, but now CLEVR Money is confident that the health worker, now a member of the credit union, can see an end date for repayments and hope for a time when they are debt free.
Anthony said: “The member only has one refund left to worry about. At £175.18 per month, this is half the previous monthly outlay, as our interest rate is much lower than these other loans. It may seem like getting a £5,500 loan when you’re struggling to repay isn’t the right thing to do, but it’s about replacing bad debt with a more responsible option.”
The healthcare worker said they could sleep better now: “You can’t believe how much better I feel just talking to someone who is willing to listen and try to help. I now see that in three years my loan will be fully paid off. The problem with my credit cards, I was trying to pay more than the minimum payment, but I still haven’t seen much reduction in my balance, so I couldn’t see an end date.”
Anthony added: “Because we are a credit union, our goal is to help people reduce their debt, not to make money, our loans are to help people get out of a hole, not to push them any further. This member now has more disposable income and can therefore pay for fuel and other additional costs without using a credit card. Repaying the loan from the credit union will help rebuild their credit score so they have a chance of getting a mortgage or car loan in the future, and we also put a portion of their repayment into a savings account. saving for them for the next rainy day.
* CLEVR Money has warned people to beware of escalating debt with PayDay loans, Buy Now Pay Later deals and loan sharks. He warned: “These kinds of loans can go bad very quickly as the debt soars.”
You can apply for membership if you live or work in the postcode areas: PR1 – PR5, FY1 – FY8 and LA1 – LA2.
You can also become a member if your employer is a CLEVR Money Payroll Partner. These include Preston, Wyre, Fylde and Blackpool Councils, UCLan, Lancashire & South Cumbria NHS Foundation Trust, Blackpool Fylde and Wyre Teaching Hospital Trust and seven local housing groups including Regenda, Preston Community Gateway and Blackpool Coastal Housing .
To contact CLEVR Money call 01253 478827 or email [email protected] To apply for a loan, see https://clevr.money/loans/