PEOPLE in financial difficulty are being urged to stay away from payday lenders and instead use credit unions as the economy bites.
Credit union Essex Savers is warning residents to avoid high-interest loans as the effects of the benefit cuts take hold.
The not-for-profit co-operative also claims that more and more benefit claimants are using the service as a result of unprecedented changes to the Welfare State.
"Because of the benefit changes we're helping so many more people," said Essex Savers' president Alison Davies.
"We are trying to get people on welfare benefits to join us so the transition to universal credit is simple and smooth."
She urged claimants not to use costly pay day lenders, whose annual interest rate can be as high as 5,000 per cent, compared to just 12.7 to 26.8 per cent at her credit union.
The problem, she adds, is that high street banks will only lend to people with good credit histories and amounts above £3,500.
Whereas Essex Savers will lend as little as £50, and up to £7,500, often for essential items like washing machines, fridges, baby clothes and home improvements.
When Matthew Walsh's 61-year-old sister-in-law died in Ireland, Essex Savers lent him the money he needed to get to her funeral.
"I was in a bad situation financially and I wouldn't have been able to go back until the credit union helped me out," said Mr Walsh, who is originally from Ireland.
The 56-year-old, of Melbourne Avenue, Chelmsford, who turned to a credit union after falling victim to pay day lenders, said: "If I wasn't with the credit union I don't think I could have gone to the funeral.
"I used pay day loans and all that interest that I paid feels like such a waste.
"I like the simplicity of a credit union. I can get my pay in there and build my own credit history."
Essex Savers, based in New Street, Chelmsford, is staffed mainly by volunteers and owned by its members – and only money deposited by members can be lent out.
Gary Bugden, a landlord and part-time pizza delivery driver, said he struggles to even open an account at a high street bank.
The 52-year-old, of Brook End Road South, Chelmsford, said: "It's very difficult to even get a basic account with a lot of high street banks because they know they're not going to make much money out of you.
"The only way was to look at a credit union."
Katie Major, 30, of Malvern Close, Chelmsford, said: "A year and a half ago when I'd just started at the credit union the clutch went on my car – it was two weeks before Christmas, just before my daughter's birthday party. It was such a nightmare.
"I applied for a loan against my savings and managed to get my car fixed. If I hadn't been able to go to them I don't know what I would have done," she added.
"They help you save for a rainy day and stop you from spending money needlessly. It helps people get a bit more confidence."
The scheme is open to anyone who lives or works in Essex and now includes limited companies as well as social clubs and Scout groups.
Organisations can deposit up to £15,000 with repayments based on individual circumstances.
Membership starts at £4 for adults and is free for under 16s.
For more information, visit www.essexsavers.co.uk or call 01245 496314.
