Cost of living crisis sends 1m to loan sharks
One million people are believed to be using illegal loan sharks as the cost of living crisis intensifies.
According to a new study by a Cambridge University academic, single parent families are most likely to be living in poverty and turning to unaffordable borrowing to make ends meet.
Dr Jodi Gardner, university lecturer in law at the University of Cambridge and a fellow of St John’s College, has called for affordable borrowing to be made more widely available to people who need short term loans to cope with the rising cost of living.
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“The illegal credit market has expanded hugely,” she said.
“There will be a perfect storm of people unable to make ends meet, with no social security network and very limited access to legal credit.
“The bottom line is we have to reduce poverty. We have to ensure everyone has access to a safety net when they have unexpected financial difficulties. And they don’t have to turn to high-cost credit loans to bridge that gap.”
Dr Gardner’s comments come as inflation hit 10.1 per cent – the highest level since records began in 1997. Further increases to the energy price cap have sparked calls for urgent help as many families face making a choice between food and heating.
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“There are other drastic measures people take when they cannot make ends meet – they go without food, they’re reliant on food banks, they go without heating their home, which has a variety of different kinds of social and health outcomes, or they ask for money from family or friends,” Dr Gardner said.
“Those suffering are being pushed further down the line. Unless we make sure that there’s some sort of safety net for the people who are already struggling, then the reforms done so far to try to improve welfare by cutting off the financial products, are likely to do more harm than good.”
Dr Gardner added that while high-cost, short term borrowing carries its own risks, “it is nowhere near as dangerous and harmful as borrowing from illegal lenders”.
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