Low wages: growing loans for basic living

Workers turn to loans as very low living wages fail to provide basic necessities

09:17 26 July 2013

John Sentamu, Archbishop of York, has waged war on the government entities responsible for allowing millions of British workers because of their very low wages that could barely sustain very basic needs.

While debates between the government, political parties and the church are going back and forth on what could be the rightful living wage, millions of affected workers have perhaps taken their needs to the nearest loan shark or payday loan providers, in order to be able to augment their pay checks.

For people walking on a financial tightrope, they see these short-term lenders as their ticket to redemption. Why is this so? Simply, because one can get a loan so easily without going through the usual rigmarole of credit checks, collaterals and co-makers.  This could be truly so if the borrower can pay his payday loans and try to subsist with whatever remains to take home.

However, the harsh reality is that come next payday, the borrower may not be able to pay his loan, so he may have to take on another loan from another lender, or be coerced to roll over his current loan with compounded interest, not so different from digging his own financial grave.

It is not surprising that payday loans have become a multi-billion industry as scores of low income workers turn to them every month.

It will take a lot of sensibility and resolve to get out of this depressing cycle. But it can be done. A lot of problems brought about by short-term loans stems from the borrower’s lack of information and self-discipline. Perhaps, every wage earner’s golden rule should be “spend less than you earn”, then the workforce’s finances will be in a better shape.