Clevr Money Supports Members from Cost-of-Living Debt

Thursday 25 January 2024

The cost-of-living crisis created a financial headache for a Lancashire health worker who was “rescued” by Clevr Money Credit Union. In a detailed account in the Lancashire Post, the credit union describes the financial crisis the member was in before turning to them for support.

What was initially a small credit card debt for the care worker who wishes to remain anonymous, the scale of their problem continued to grow and grow.

CLEVR Money explained how the worker, who was paying for petrol for work and reclaiming mileage expenses fell into ever greater debt.

A spokesperson for the credit union, which serves Preston, Blackpool, Fylde, Wyre and Lancaster, said: “Due to increased fuel prices, their petrol had increased by around £15 per week. This, on top of other increases in food and household bills, was more than they could afford so they paid for petrol using a credit card.”

When taking into account an existing credit card debt, plus general debt and charges for buy now pay later purchases the worker was struggling to pay £365 per month in repayments.

That’s when they began to apply for PayDay loans online. Applying for 11 loans over three months the member realised it did not add up and did not progress them, but by then their credit rating had been hit by so many applications. A turning point came when they applied for a £1,000 loan via the CLEVR Money website.

The member said: “This loan is going to change my life for the better I will be able to concentrate on things and sleep and not worry about my working day and where I have to travel doing my job.”

Loans manager Anthony Brookes reviewed the loan application and saw the repeated applications and rang to find out what was going on.

He said: “I saw the figures and I just picked up the phone, I could see they were panicking with 11 applications in three months. As none progressed, they seemed to realise that wasn’t the answer, but I could tell they didn’t know what to do. When we spoke, they were so nervous and worried we’d turn them down. I could hear the relief in their voice when I said we could help, and we could do better than they expected.”

Anthony reviewed the outgoings and repayments. He said a debt consolidation loan of £5,500 would pay off the existing credit cards and store cards, leaving the worried worker with one single loan with a lower repayment than before.

The new loan of £5,500 is being repaid over 36 months at £175.18 per month with an interest rate of 9.5% APR meaning a total of £6,306.48 will be paid back. This compares to their existing repayments of £365 per month which went to six lenders. This totalled £5,250 of debt which was ever-increasing due to significantly higher interest rates being charged.

There is a way to go, but now CLEVR Money is confident the health worker can see an end date to the repayments and look forward to a time when they will be debt-free.

Anthony said: “The member now only has one repayment to worry about. At £175.18 per month, it’s half the previous monthly outgoings because our interest rate is much lower than those other loans. It may seem like getting a £5,500 loan when you’re struggling with repayments is the wrong thing to do, but it’s about replacing bad debt with a more responsible option.”

The health care worker said they would be able to sleep better now: “You can’t believe how better I feel just speaking to someone willing to listen and try and help. I can now see that in three years my loan will be paid in full. The problem with my credit cards as I was trying to pay more than the minimum payment, but still didn’t see much reduction on my balance by much, so I couldn’t see an end date.”

Anthony added: “Because we’re a credit union, we aim to help people reduce debt, not make money on them, our loans are meant to help people out of a hole, not put them deeper into one. This member now has more disposable income so can pay for the fuel and other increased costs without using a credit card. Paying back the credit union loan will help to rebuild their credit score so they have a chance at getting a mortgage or a car loan in the future, and we’re also putting some of their repayment away into a savings account for them for the next rainy day.”

Source – Lancashire Post