Cash-strapped Brits are being warned about the dangers of certain types of fast loans, after research has shown we are a staggering £1billion in debt from some of them.
A new BBC Panorama documentary, airing tonight, speaks to people struggling with debts from companies such as Amigo, Quick Quid and the now defunct Wonga that went into administration last year.
Increasingly popular amongst people with poor credit histories, one form of lending - a guarantor loan - involves a friend or relative agreeing to take responsibility for the debt if the borrower can't make a repayment.
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Last year, over 3,000 people in England and Wales went to Citizen's Advice for help after battling to pay their debts to guarantor loan firms. Balances on these are now nearing £1billion - more than double what they were three years ago.
On the programme, presented by Fiona Phillips, one borrower discusses her experience with Amigo. She explains how simple it was to apply for a guarantor loan, after wanting to book a holiday, despite the fact her debts were already mounting massively.
She had already borrowed £8,500 from Amigo and was still making repayments of almost £200 a month. "I had a guarantor and we both filled in the paperwork. I think within 24 hours the money was paid out," she explains.
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With interest added, she will have to pay back more than £23,000 over the course of five years - more than double the amount she originally borrowed.
Amigo says it goes through a strict vetting procedure before lending money to check people are able to make their repayments with Emma and her guarantor both passing these.
The BBC investigation also looks at people relying on pay day loans - short-term loans designed, they say, to help bridge the gap between pay days.
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Last year Wonga, then the UK's biggest payday lender, went into administration. At its peak, it was charging what amounted to 5,853 per cent interest on its loans annually. In 2015, the Financial Conduct Authority, put a cap on its charges so a borrower would never pay back more than one hundred per cent in interest.
Wonga went into administration just a few years after although other pay day lenders such as Quick Quid, who have to abide by the same FCA rules, continue to operate.
One customer told Panorama he owes more than £4000 to the company, when interest rates and charges are added, after borrowing £2630.
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The BBC investigation found there were 42 rulings upheld against Quick Quid earlier this year, all rejecting the company's argument that it has been lending responsibly since 2015.
Quick Quid has made its own formal complaint about the Ombudsman's Service's 'inconsistent approach.'
BBC Panorama: Easy Money, Tough Debt? airs at 8.30pm on Monday 17th June 2019 on BBC One.
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