Christmas is fast approaching, and with it comes more spending. Unfortunately, a survey by The Citi Handlowy Leopold Kronenberg Foundation shows that 40% of Poles save, but only one in ten do so regularly. This means that only a small proportion of us have set aside funds that can be used for Christmas expenditures. For many of us, a dangerous remedy when we're out of cash remains the so-called "payday loan" - in a crisis situation 16% would make use of this option.
"Our survey shows that one in ten Poles have taken out payday loans at least once in their lives, and 59% of them say they would do so again," says Krzysztof Kaczmar, President of The Citi Handlowy Leopold Kronenberg Foundation. "One such situation can be the approach of Christmas holidays, when people lack savings but need to buy gifts and arrange Christmas Eve for their families. Unfortunately, in our society the saying "zastaw siê a postaw siê" ("Even if we can't afford it, there's always money to impress guests") is still put into practice, especially on this type of occasion. We still don't understand that a fast loan from an uncertain source is not a good solution and can cause us to fall into a spiral of debt very quickly, especially given that 19% of respondents acknowledge that they usually only have a quick look through the contracts for such loans."
Payday loans are a serious problem for Poles, especially at times like Christmas or Easter. Companies offering "quick loans" or "fast cash" try to tempt people with ads promising "first loan for free", but concealing their true costs in cleverly worded contracts. Their assurances find fertile ground mainly due to the lack of financial knowledge among Poles. Not only do we not know how to distinguish shadow banking institutions from banks, we don't understand the mechanisms of financial products either. Surveys by The Citi Handlowy Leopold Kronenberg Foundation show that over one-fifth of respondents still think that at the time of signing a contract with a bank they are not able to calculate the total cost of credit or interest rates on time deposits. This is an easy way to fall into a debt trap. Because although more than one-third (35%) of us are aware that loan companies don't always provide us with full information regarding the costs of loans taken out, and more than half (53%) don't trust non-bank institutions, we still make use of them.
So then why are payday loans so popular? Poles indicate that, first and foremost, it is because of the possibility of obtaining money faster than by applying for a bank loan (54%). Second, they point to the minimal formalities (36%) and the lack of creditworthiness requirements (31%). A payday loan therefore seems to be a convenient solution, at least for some. 5% of people who have taken out such a loan want to do so again, and choose a company based mainly on the amount of the monthly installments. But what if something unexpected happens in their lives, like an accident or a job loss? Interest on a seemingly small loan will grow dramatically and, before we know it, we'll have to take out another loan to pay off the first one. Unfortunately, the truth is that although advertising slogans say something else, a loan from a non-banking institution loan is a very risky venture and so before signing we should give serious thought to whether we can really afford it.
