According to a study by the government-backed Money and Pensions Service, young people are twice as likely to turn to high-interest payday lenders than not-for-profit community lenders.
Friends and family were the main source of loans for the 25-34 age group, with 26% saying they would turn to ‘close contacts’.
Meanwhile, 19% said they would consider payday lenders or other high-cost short-term credit if needed.
Only 5% of respondents said they would consider borrowing from nonprofit lenders such as credit unions.
There are 7.7 million financially vulnerable adults in the UK and almost half are aged between 25 and 34
Additionally, the non-profit financial organization Fair4All estimates that there are 7.7 million people aged 18-34 who are financially vulnerable, accounting for nearly half of the 17.6 million estimated adults living in these conditions.
Lauren Peel of Fair4All Finance told This Money: “We’re seeing people who already feel like they’ve cut back and are still overdrawn every month.”
“But they have goals and are ambitious about where they want to live and what careers they want to have.
“A lot of them are tenants and it’s not always a stable market. People worry year after year about the increase in their rent.
What are credit unions and community lenders?
Credit unions are financial cooperatives that provide savings, loans and a range of other services to their members. To join, credit unions generally require members to be part of a common bond, such as living in a designated area or working for a particular employer.
However, you may not always need to be a current union member to use its services.
These organizations are often able to lend money to customers on more favorable terms than other street lenders and have programs in place to help more vulnerable borrowers who may have difficulty accessing credit elsewhere.

Victoria Barry, 36, got tricked by payday lenders in her early 20s, but with the help of a credit union she was able to pay off her debts and is now a homeowner.
Victoria Barry was caught in a vicious cycle of using high-cost payday loans when she was in her early twenties.
Speaking to This is Money, Victoria, now 36, from Manchester, said she initially borrowed just £20 from a payday lender after a friend recommended they fund a night out at the end of the month. However, caught up in the high interest charges, Victoria continued to supplement her salary with loans at the end of the month.
She reached the point where she was paying off almost all of her salary to payday lenders on a monthly basis and then had to get another loan to live on. The tipping point came, she says, when her borrowing exceeded her income.
“The next payment was going to be money I didn’t have in my account,” she recalls. “I only had a salary of £10,500 and the month before I had borrowed £700. With the £150 in interest, I had no way of giving them that money.
At the time, Victoria was working for Co-op Insurance and had noticed advertisements for her credit union on her workplace intranet.
“It was quite shameful, my family is not in debt, so I felt like I had let people down and didn’t want to turn to them. I saw it [credit union adverts] on the intranet and thought I’d give it a try.
It was pretty shameful, my family is not in debt, so I felt like I let people down and didn’t want to turn to them
She says she was worried union staff would blame her for mishandling her money, but when she met an adviser in person he was reassuring and helpful.
They provided him with not only an affordable repayment plan, but also financial health tools, such as budgeting skills, to be able to manage his money.
“Nobody tells you how you budget and it’s very simple, that’s where the money comes in and that’s what you can spend,” says Victoria who now has her own home in Mossley, Greater Manchester .
“It was about someone listening to you and not judging you, which was the most important thing for me at the time.
“Looking back on that time it felt like there was no hope so I’m happy to share my story because if a person like me hears there’s someone out there who can help you who is not a loan shark or pay day lender so it’s worth it.
What else can you do if you need credit?
The first thing Peel suggests is to check if you are entitled to benefits that you are not already claiming.
There are online tools to determine if you can access other sources of income. It is estimated that around £15 billion in benefits go unclaimed each year.
When there’s a need for credit, don’t be ashamed, she says. Just be sure to do your research and approach financing providers who can help you find a lower cost option.
High-cost payday lenders are often at the top of search engine results, so take the time to look a little deeper to determine what’s available and affordable.
Victoria Barry echoes the message that you shouldn’t be ashamed if you’re in financial trouble and seek help.
She suggests talking to a credit union, but even if they can’t help you, they can direct you to other sources of help.
“Asking for help is the first step,” she says.
According to a study by Bluestone Mortgages, one in six adults (16%) say they are too embarrassed to ask for help when they are in financial difficulty.
However, a bigger barrier to getting advice is that almost a third (31%) don’t think they have a right to help, while more than a fifth (22%) say they don’t know where to start looking for help. .
To raise awareness, credit unions and other community lenders are encouraging young people in their 20s and 30s to review their credit choices and consider the options available to them through a range of local and national community lenders that may suit their financial circumstances.
They can be found at Find your credit union – the funds near you and Find Finance – Responsible finance providers offering simple, smaller and affordable loans.
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