New Pet ‘Payday’ Loans Come Under Fire for Extortionate Rates
If you have a pet who suddenly became ill, or was involved in an accident, and you had not got insurance, what would your next step be? Borrow hundreds of pounds from a kind relative? Approach your vet to see if you could come to some arrangement to pay on a monthly basis? Apply for a bank loan to cover the costs? You probably would not get a bank loan as they are not typically given out for this reason but one ‘solution’ may be a new kind of payday loan, which is specifically targeted towards pet owners who cannot afford the vet bills. Much as any payday loan is arranged, you borrow the amount you need to cover the bill, then, at the end of the month you stump up the amount, plus the interest. No problem you think, but it becomes a problem if you have your typical monthly outgoings and you cannot afford to repay the loan. The interest shoots up and you are left in a vicious cycle of constantly repaying the interest, with no hope of ever repaying the original loan off.
Payday loans were originally designed to help people cope until their next wage instalment, but they often come with extortionate rates of interest and now, one lender, Petloan.co.uk is offering short-term loans to specifically cover unexpected vet’s bills caused by a poorly pet. But if you take out a pet loan of £200 from them for 30 days, you’ll end up paying back £58 in interest when repaying. Over one month that is 29 per cent interest, but if you do not manage to repay the loan in that period you’ll find that the debt rapidly increases. Petloan’s quoted annual percentage rate (APR) interest is 2,120 per cent. And some people are not happy with this saying that it is targeting vulnerable people. Una Farrell, of the Consumer Credit Counselling Service (CCCS), says, “This is such a cynical way to market very, very expensive credit. Most pets are much loved, with their owners doing everything they can to take care of them. These payday loan companies know that, and their adverts exploit it. The question you have to ask yourself with this is, what next?, and what new low will they stoop to next?”
Politicians are also on the case with Labour MP Stella Creasy, campaigning for the government to introduce a total cost cap on short term loans. She does not believe that payday loans are the cheapest way to borrow at short-notice. She commented on the subject, “We are a nation of animal lovers and it can be expensive if your pet falls ill. These firms are targeting people when they’re most vulnerable – whether it is women, those wanting cosmetic surgery or pet owners – and it’s exploiting an emergency. If your pet is ill then you’re more concerned with getting them treated rather than the cost. The way they advertise is completely legal and that’s why the industry needs regulation. I would urge people to join their local credit union because they will just pay a one off fee to borrow at much lower rates.” And Wonga, who are probably the most well known of the payday loan companys have had their fingers rapped by offering their short terms loans with 4,000% interest as an alternative to a student loan.
In response to the outcry from concerned parties about the pet loans, Ash Sethi, the Managing Director at Petloan.co.uk, commented, “I would like to offer more competitive rates for the loans but we are a new company. There are lots of pets that are being abandoned or killed when they get ill because people simply cannot afford to get them treated. But I do believe that have a valid audience and provide a service to those who couldn’t otherwise afford it. It is our understanding that many pet insurance policies do not pay immediately, with insured often waiting up to a month for reimbursement. Our facility offers owners the chance to make sure that their pets are cared for by vets without having to worry about cash flow problems.” Sethi also said that his company do run credit checks as par for the course on potential customers before they lend.
When you consider that pet insurance can cost only a few pounds a month, it really is best to get them insured, rather than have to rely on a high interest loan that you may struggle to pay back and that could leave you with further debts.
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