There is a clear need to act to improve the UK’s financial capability. Individuals are being required to take on more responsibility for their financial decisions.
(PRWEB UK) 1 October 2012
More than half of all payday borrowers in the UK don’t understand how annual percentage rates (APRs) work with short-term loans, according to a survey conducted by 100 Day Loans UK.
The loan website found that 21 per cent of surveyed borrowers had an inaccurate idea of APRs, while 31 percent said they “somewhat” understood how the term relates to payday loans. Five per cent had no idea how payday loan APRs worked.
Polling more than 260 Brits, half of whom were payday borrowers, the survey revealed insight into the financial literacy of payday customers. Only 43 per cent of borrowers correctly understood APRs, which determines the amount of interest paid over one year.
Surveyed borrowers cited monthly living expenses as the most common reason for taking out loans, suggesting that many payday customers have trouble managing the basics of their personal finances. The survey also found that nearly 60 per cent of borrowers had to take out an additional loan or extension to cover an existing payday loan.
Focus on Financial Literacy
In recent years, financial literacy in the UK has become a greater national focus. In 2006, the Financial Services Authority (FSA) released Financial Capability in the UK: Delivering Change, a report that found many Brits have inadequate financial knowledge and skills.
“There is a clear need to act to improve the UK’s financial capability. Individuals are being required to take on more responsibility for their financial decisions,” the report states. “Yet many lack the skills or knowledge to do so, and some groups appear particularly vulnerable.”
One such group is payday borrowers, a demographic that continues to grow as the economy suffers. Research suggests that more than one millions Brits take out payday loans each month for basic living expenses.
In June, a bill was introduced that would require the national education curriculum to include financial literacy lessons. The bill, which will be debated in January 2013, would create a curriculum focused on improving financial preparedness, risk management and other financial practices.
About 100 Day Loans UK
100 Day Loans UK provides consumers to short-term lending options online. The site also offers financial resources, news and information to help consumers make informed borrowing decisions. Learn more about findings from the 2012 I Hate You Payday Loans Survey here.