Equity Release could stop debt ridden loved ones turning to payday loans
Recent news that an estimated 3.5 million people will take out a “payday loan” within the next six months could cause a rise in equity release activity.
According to a recent survey of 2000 people by insolvency experts, R3, there has been a vast increase in demand for short-term payday loans with 45 per cent of people failing to make their income last. This figure goes up to a staggering 62 per cent when considering just 24-44 year olds¹.
Payday loans are designed to “help” tide people over until they receive their next wage. However, with interest rates on these loans reaching 4,000 per cent in some instances, they can often hinder far more than help especially as they tend to be utilised to pay other existing debts. This means they are unable to repay these should-be short term loans quickly, resulting in higher and higher charges.
Gillian Guy is the Chief Executive at the Citizen’s Advice Bureau (CAB):
“We have seen a four-fold increase in the number of people with payday loans coming to us for debt advice in the first quarter of this year, compared to the same period two years ago.
“We are concerned that some of the people we are seeing seem to be using payday loans to deal with existing financial difficulties. 40 per cent of people we see with payday loans have another high-cost credit loan and on average, CAB clients with payday loans debts had eight debts.”²
As the younger generation continues to live a life on credit, it is unsurprising that the older generation is considering equity release as a means to help their struggling, debt ridden loved ones now when they desperately need it instead of saving it for their inheritance.
Equity release allows you to release funds from your property whilst also giving you the right to remain living there for as long as you wish.
Anyone considering equity release should consult both financial and legal advisers. The GW Lifetime team at Goldsmith Williams Solicitors are equity release legal specialists and can explain the legal nature, implications and effects of an equity release plan so you can make a fully informed decision.
Content correct at time of publication