New year, Wonga, the spiral of debt and the credit crutch.

One of my new years resolutions is to be a bit more regular with my blog entries. However, I'm not a big fan of new years resolutions (I always feel
that any promises made to oneself on January the 1st tend to get broken by January the 4th!!), but this is one I fully intend sticking to.

However, I wanted to keep the theme of this entry new year related....in particular the sponsorship of London's public transport for new years eve by the payday loans company Wonga.

Firstly, let me say that I love the idea of free travel on New years eve. I also appreciate the fact that Wonga is a commercial and legitimate enterprise who have the right to advertise wherever and sponsor whatever they decide.

However, I still feel uneasy about this particular partnership and especially at this time of the year....let me explain to you why.

Firstly, at this time of year I'm sure there are plenty of people who have overextended themselves financially over the Christmas period and are looking for a way to ensure that they are in a position where they are able to have spare cash during this time. Wonga might seem like an ideal solution for many, however when you look at the cost of one of these loans, it has the potential to drop someone into a spiral of debt it may be tough to escape .
Although this option may seem like an ideal superficial short term fix, the implications could be long lasting and mean that the individual continues to remain dependent on this source of credit.

Which brings me on to my second point. Whilst loans of this type may solve short term cash-flow issues, they can also be used as a crutch for many which then Individuals and families become dependent on over the longer term. It would be interesting to see how many of wonga's customers are regular users of their service... and wouldn't be entirely surprised if a high level of payday loan firms business comes from repeat custom.

So, what are the solutions to the issue of the "spiral of debt" and the "credit crutch". Like many of this issues, part of the solution comes in the form of education. The good news is that with the power of the web information is ever more accessible and there are plenty of great people out there doing some brilliant work in helping everyone understand money matters more clearly on the web (including Pete Matthew with meaningful money, the ladies and gents behind Project Eve and the money made clear team).

So, how do you feel about the recent rise of the payday loan? Do they meet a need, or contribute to individuals becoming more dependant on credit? Also, what else can and should we do as a society to help people manage, save and invest their money more effectively?

What do you think?