Payday lender ‘Speedy Cash’ is offering £20 to customers who refer a friend, as struggling families turn to last resort borrowing in the run up to Christmas.
The promotion says “Send some friends. Earn cash rewards” and “For every friend you send to Speedy Cash, we’ll give you £20.”
Loans with 2000% interest rates
Borrowers will face a representative APR of 2115.69% on a 30 day loan. A debt of £200 would cost £258 if repaid at the end of the month.
If left unpaid, £25 default fees will be added on, and the debt could end up running into the thousands by the end of the year.
New rules for 2015
The news follows the Financial Conduct Authority’s (FCA) decision to crack down on irresponsible lending. It is expected that 99% of payday lenders will go out of business by the end of 2015.
From January 2015 the amount of interest that payday lenders can charge will be capped at 0.8% per day.
The FCA state that no-one will have to pay back more than twice the amount borrowed. Default charges will be capped at £15.
Alternatives to payday loans
Many of those turning to payday lenders to make ends meet are already in poor financial health and are unlikely to be able to borrow for the best rates.
Having bad credit makes it challenging to borrow money from traditional lenders there are options available, often for significantly better rates than payday loans, even once the FCA caps come into play.
- Bad-credit credit cards Theses are are designed to help you rebuild your credit rating. Whilst the APR is expensive it will still cheaper than a payday loan.
- Current accounts with authorised overdrafts Some bank accounts offer interest-free overdrafts for a few hundreds, others offer larger amounts but charge interest.
- Bad-credit loans Loans are typically the cheapest way of borrowing money over the long term, but tend to require good credit ratings, however there are lenders who will offer loans to borrowers with poor credit scores.