Universal Credit Will Push People Into 5,000% APR Loans

As part of the benefits system change, many will be shifted from getting their money weekly to monthly. Some will also be responsible for paying rent directly for the first time.  It’s likely to be a struggle for some on benefits for two reasons…

    *Financial capability issues amongst some benefits recipients. There are many factors that impact this: mental health, mental capacity, literacy, numeracy, educational achievement and many more. All of these make the process of effective budgeting more difficult to achieve.

    *Lower incomes make budgeting more difficult. The less you earn, the more difficult budgeting is. Less cash means any small unexpected expenditure disproportionately impacts the overall sum.

The DWP have asserted: "We are working with local authorities and the financial industry on how best to support individuals."   My suspicion is the most relevant part of the financial industry for this are payday lenders, the short term loan companies with APRs of up to 5,000%. When people have low incomes and no cash, they are sadly becoming the first port of call (or worse, illegal loan sharks).   The Government needs to engage in solutions to this – or money being paid out as a benefits safety net to those who need it will be going in the payday lenders or loansharks’ pockets instead.  Read more on the MoneySavingExpert website.