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App directs poor to credit unions not payday lenders

The hard-up will be able to find cheaper credit rather than ending up in the arms of loan sharks and payday lenders, thanks to a new mobile phone app currently in development.

Social innovation and technology company FutureGov has secured £50,000 of funding to start developing 'Popcash', a secure phone app that directs people looking for loans to cheaper and more responsible lenders such as credit unions.

It is borne out of a FutureGov pilot project that studied the lives of people on benefits in partnership with Lewes District Council, in East Sussex, but the intention is to make it widely available around the country after it is launched, which it is hoped will be by the end of the year.

App-roval pending: FutureGov hopes to launch the loan-finding app by the end of this year.

Should it prove successful, it will be another string to the bow of the credit union industry, which is expanding to meet the challenge of offering more accessible, less expensive forms of credit than the 4,000 per cent-plus APR charged by payday lenders such as Wonga.

FutureGov spokesman Ben Matthews said: 'We've been working with local people on benefits to explore where the real punch points are in their lives and what we can do to meet them.

'Research conducted so far shows that "payday loans" feature highly in the lives of these people.

'Our research has also shown that more of the local people we are working with have access to mobile phones than a computer. This all lead to the idea of creating a mobile product that empowers people with limited means to take control of their lives through better borrowing and saving habits.'

  More... Credit Union push to force out payday lenders with landmark expansion that will see local co-operatives join forces Credit unions to offer more cheap loans to in battle against loan sharks and payday lenders Looking for a loan? Find the best deal

Credit unions see members pool their savings to offer other members credit. Their loan rates will typically be higher than most High Street lenders' rates, but considerably lower than the exorbitant rates quoted by payday lenders when their shorter term loans are compared on the industry standard APR measure.

The London Capital Credit Union, for example, offers loans at rates ranging from 6.2 per cent to 28.6 per cent Representative APR. This compares to the 4,214 per cent offered by Wonga, albeit for shorter-term loans.

Where they come in useful is that they are more likely to lend to people with poorer credit records who would otherwise be rejected by conventional lenders.

Credit unions might be community, industry, or workplace-based, but you need to be a member to borrow and some will require you to be a depositor to join.

The Association of British Credit Unions is hoping to attract a million new members to unions over the next five years, with the help of a £35.6million investment previously pledged by the Government to transform the sector and take the fight to the payday loan industry.

Thus far 31 credit unions have signed up to pool their resources, reducing the unions' costs and enabling them to offer better rates to members.

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