Payday lenders targeting students heading off to university offering loans charging up 1,294% interest
PAYDAY lenders and brokers are targeting university students ahead of the new academic year with short-term loans that charge up to 1,294 per cent APR interest.
High-cost creditors are preying on those in education who would struggle to be accepted by a traditional high street lender due to poor credit history or irregular income.
But their sky-high interest rates could actually push skint students further into debt.
The Sun found five payday loan brokers and one payday lender advertising loans to students who either work part-time or are unemployed.
Sara Williams, who runs the Debt Camel blog, has branded the firms that target those in education as "disgusting".
She told The Sun: "Students have low incomes and little experience of managing money.
"Repaying a loan in the following term will often leave them so short of money that they may have to get another loan."
Since 2015, lenders have been capped at charging 0.8 per cent interest a day but APR includes extra fees such as broker charges and closing costs.
Interest rates can be different from the advertised rates depending on your credit history and circumstances but high-cost creditors charge extra for lending to "riskier" borrowers.
Broker New Horizons has a page on its website dedicated to payday loans for students that runs comparisons on regulated payday lenders based on 49.9 per cent APR.
But it's not until you click through to get a quote that you're told that some lenders charge up to 1,294 percent APR.
To put that in perspective, a personal loan from M&S Bank charges 2.9 per cent APR.
Another site that features a dedicated student page is brokers Payday Pixie, where you can apply for a loan of up to £1,000 with representative interest rates of 728.9 per cent APR.
How to get help if you're a uni student
IF you're struggling to make ends meet at university, here are a few options you can look into:
Grants – You may be entitled to some free cash to help pay for books, equipment and other educational costs. You might also be entitled to a bursary if you study a specific subject. For example, the Institution of Engineering and Technology (IET) Horizons Bursaries can help engineering and technology students. Use the Turn2us Grants Search to find out what you're entitled to.
Schemes – Students may be able to get extra help from the government through Student Support if they're from a low-income family, living with a disability or if you have children. You'll need to speak to your university directly to find out what support it offers.
Benefits – You may be able to claim benefits to help supplement your income while you're studying – but it depends on your circustances. Employment and Support Allowance (ESA) and Housing Benefit are just a few payments you may be able to claim. You can use the government's benefits claultor to find out if you can get help.
It's a similar case with broker My-Quick Loan which also advocates that students are likely to be accepted by a payday firms as long as they have "some form of income".
Meanwhile, broker Loanski promotes applying for a loan online means that you "don't have to leave your dorm room", even though the APR can stretch to 305.9 per cent, the same rate used by OMACL.
Smart-pig.com lends specifically to students, sums of up to £350 that must be repaid over up to 180 days but at a representative rate of 448 per cent.
It's the only firm that caps the interest you pay back at 50 per cent of the amount you borrowed.
Money expert Martyn James from Resolver has slammed the practice of "trapping young people in to debt" as "despicable".
He added: "But the banks and other lenders need to step up too by offering help for people who are struggling.
"If you're young and have money troubles, don't borrow your way out of debt. Seek help – there's tons of free assistance out there. Don't be afraid to say you're struggling."
New Horizons said that it doesn't set interest rates and that its website says that students should only seek them "when they have no other option", and as long as they are affordable.
A spokesperson said: "We don’t agree with push marketing coercing students into applying for credit.
"Our site has a page answering a number of questions typically asked by Students looking for credit.
"This page will only be found by students who have already made the decision that they need access to credit and have searched on Google or another Search Engine to that effect."
A Smart-pig.com spokesperson said: "Our loans are not instalment loans, students borrow up until their next student loan date, however, they can pay the loan back at any time.
"Our loans come with a ten-day grace period, no late payment fees and our customer service team is always available to help should a student find themselves struggling to pay back a loan."
Payday Pixie emphasises that it does not provide consumer credit products directly.
The Sun has contacted Loanski, My-Quick Loan and OMACL for comment.
Earlier this year, we revealed how loan sharks and payday lenders are targeting areas where students live more than others.
Payday lenders have also been preying on hard-up parents and charging 1,333 per cent interest on children's school gear.
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