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Poverty Forces Families Into High-cost Loans

Poverty forces families into high-cost loans

A new report by Save the Children reveals that as many as 2.3 million people in the UK on low incomes are being forced to take out high-interest loans at rates topping 183% APR - many simply to provide essentials for their children.

Save the Children's report, Robbing Peter to Pay Paul, shows how desperate parents have to choose between essentials for themselves or adequate clothing, meals and heating for their children.

It also reveals how easy it is for parents who are struggling to provide the basics for their children to be forced into taking out loans at exorbitant rates of interest.

Millions of people resort to high-cost credit. Companies such as Provident and Brighthouse are known as a 'doorstep lenders' because they provide credit and collects repayments door-to-door, or target deprived areas of the UK selling household goods on credit at extremely high rates.

One of the problems, according to the report, is that many poor people are unable to obtain credit from banks and cheaper lenders because they are considered too high a risk.

"Doorstep lenders exploit poor families' inability to get credit from more mainstream lenders and they cover their risk in lending to the less well off by charging punitive interest rates. The core problem is not the companies themselves, but the poverty that forces people to use them," says Jason Strelitz, the report's author.

Rather than calling for these companies to be further regulated - which could risk leaving families with no credit options at all - Save the Children sees this as a call to action on eradicating child poverty.

"This is about tackling symptoms, not causes," says Strelitz.. "The government is off track in meeting its own target of halving child poverty by 2010."

Save the Children, as a member of the Campaign to End Child Poverty, is asking the government to invest £4 billion to support the incomes of the poorest families in UK.

We're campaigning for the introduction of seasonal grants of £100 per child living in poverty to be paid in summer and winter - the most financially demanding times of the year for poor families.

These grants could help lift more than 440,000 children out of poverty.


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