DEBT can ruin a person’s life and sometimes even lead to suicide. Loan sharks and even legal money-lenders often charge extortionate amounts of interest meaning those taking out loans find themselves trapped in a nightmarish situation. NEIL BRANDWOOD reports on one group which is making a difference.

ANYONE who has ever fallen into dire financial straits will understand and sympathise with the story of Angela, a Bolton woman who works as a senior administrator, who fell into the credit card buy-now, pay later mentality.

Angela was finding work very stressful. She didn’t seem able to concentrate on anything for any length of time and wasn’t managing to meet her deadlines.

She eventually called in sick and was off work for two weeks.

On her return her line manager discovered that the real reason she was off was that her car had failed its MOT and she did not have the funds to get the repairs done.

Travelling by public transport was taking a four-hour round trip and she simply could not cope with the journey. Because of the early starts and lateness getting home, she was feeling exhausted and she was taking her stress out on her family.

Angela did not have a great credit score and had maxed out her credit cards to the tune of £3,000. She also had a loan with a balance of £700 plus a catalogue balance of £600, so she simply could not find the money to fix her car.

After her back-to-work interview, Angela’s line manager suggested that the Bolton and Bury credit union Hoot might be able to help her with a loan to fix her car. He was a member and saved as well as re-paying a loan through payroll deduction.

Angela talked to Hoot and it gave her a loan to pay for the car repairs and to consolidate her debts. As well as paying back her loan, she saved a moderate amount as well and built up enough savings to cope with emergencies like car repairs.

Because her repayments were deducted from her wages automatically, she never missed a payment and once her loan balance had reduced by over a half she topped up to pay for her holiday.

Last year, for the first time Angela was able to pay for Christmas from her salary topped up with her credit union savings.

Angela is one of hundreds who have benefited from the support and advice that Hoot provides, but hers was just one of the many different financial problems the organisation has solved.

Next month the Financial Regulatory Body will introduce caps on the interest that can be charged by rent-to-own retailers.

This will bring to an end to a situation where people end up paying more in interest than the actual item is worth.

At present, a person may, for example, pay for a washing machine worth £300 and arrange to pay it off in weekly instalments. But with an interest rate that is up to 69.9 per cent, they could end up paying £1,200. What’s more, they would not own the washing machine until the last payment is made. If they failed to make a payment they would not only lose the washing machine, they would lose any money they had paid for it up to that point.

One person who welcomes the new cap is Chris Canham, operations manager for credit union Hoot, which is based in The Square on Victoria Square.

He said: “Anything that ensures people are treated more fairly and stops them paying excessive interest on what they’re borrowing, is good news.”

Mrs Canham knows only too well the devastating impact money troubles can have, especially when people in desperation turn to loan sharks.

One case involved a 17-year-old male who took out his first loan to buy a car. He borrowed £250 from a loan shark and paid back a staggering £90,000.

Another victim almost took his own life as his debts spiralled out of control and the threats mounted. The loan sharks threatened to smash his windows and do things to his family if he didn’t pay.

“Loan sharks operate on Bolton and Bury’s housing estates so we’ve recently done some work with the National Illegal Money-Lending team telling people to be beware of loan sharks.

“They are not the big thug with a baseball bat of popular imagination. Quite often it’s the really ‘nice’ woman who lives down the road. She’ll lend you money but when you can’t pay it back, things turn nasty.

“We came across people who had borrowed £100 but ended up paying £1,000 because of it.

“Loan sharks are very clever in the way they operate. You may be paying off the loan as agreed, but what they’ll do is offer you a bit more, sometimes saying it’s a special deal just for you because you are such a good client. People are human and can be easily tempted then, before they know it, they are trapped in a cycle where they are paying back money.”

This is yet another reason why credit unions such as Hoot are an essential part of the community.

There have been credit unions in Bolton for around 30 years. Originally, they were small estate-based ones but Bolton Council reasoned that merging them to create a single borough-wide one would be more effective and Hoot opened in 2005.

“A credit union is a community co-operative – a community bank. We don’t charge people to set up loans, we don’t charge if they pay late and we don’t charge if they pay off a loan early, in fact we encourage people to pay early because they save interest,” explained Mrs Canham.

“We’re not a bank account. We don’t have debit cards and online banking. We’re a credit union, we’re community savings and loans.

“Hoot is not a national organisation and we are owned by our members so all of our savers share the profit at the end of the year. We pay a dividend to them when we make a profit in proportion to their savings. There are no shareholders outside of our savers. Our board of directors are members elected by members.”

Hoot has around 5,000 members from all backgrounds.

Mrs Canham said: “Clients come from across the spectrum – some are employed, some are on benefit some have young families. We’ve noticed more people are getting into financial difficulties. At one point it would have been people on low incomes struggling financially but we find people in perfectly well-paid jobs are now beginning to feel the squeeze financially because it’s harder to borrow money. The banks are very reluctant unless you’re earning a lot of money, own your own home and have a squeaky-clean credit rating, so people are living off credit cards with high interest and then you start getting behind.”