City families borrow £1m – but that’s ‘only tip of the iceberg’

Almost 2,000 loans were handed out to desperate individuals in November and December who were under pressure to buy gifts and food for the festive period, said Leeds City Credit Union (LCCU) chief executive Chris Smythe.

The average loan size needed by those who got in touch with the mutual was £545. Loans teams for LCCU estimate that 80 per cent of applicants needing to borrow money were families.

Overall the amount credit union members borrowed in time for Christmas increased by 5 per cent. In 2011 the credit union handed out £954,000 for the same period.

Mr Smythe said the full extent of Christmas borrowing will come to light in January and February when monthly bills come in.

He said: “It’s good [those in need of a loan] come to the credit union rather than go elsewhere where they will get charged more.

“But what does concern me is there are so many people on particularly low incomes, who don’t have sufficient savings to deal with excesses at Christmas.

“The credit union aims to improve people’s savings.”

He added: “There’s a high commercial pressure for retailers to sell us lots of goods and there’s a pressure on consumers to buy.

“It’s understandable people want to spoil their families at this time of the year, but it is worrying they do not have savings.”

The members who chose to borrow from LCCU rather than door step lenders and pay day loan companies have saved a total of £700,000, said Mr Smythe.

The saving is due to the fact that the credit union interest rates are capped at 26.8 per cent, rather than the astronomical sums seen elsewhere.

He said: “Unfortunately those who borrowed from a high cost lender such as a money shop or pay day loan company will be paying an excessive amount of interest for their loan and will be waking up to a real headache in the New Year.”