Payday Loans See Significant Rise in Popularity
New research has revealed that the number of consumers taking out payday loans or other forms of short-term personal loan has increased by around 400 per cent in the past four years.
Researchers working for the Consumer Credit Counselling Service (CCCS) said that there had been a sharp increase in the number of firms advertising payday loans, especially online. Every year, around 1.2 million people borrowed a total of £1.2 billion from such lenders, they added.
CCCS chairman Malcolm Hurlston said that such loans could often lead to debt problems, adding: “Not only are most people who use this type of credit less well-off, they often find it hard to access credit from the mainstream banking system.”
However, defenders of payday loans said that they were far preferable to incurring hefty overdraft fees or taking out long-term unsecured personal loans.
Consumer Finance Association chief executive John Lamidey told the Metro newspaper that “people want to borrow a smaller amount of money for their immediate needs and desires and pay it back quickly”.
“If this is not a product people really like, then why is there the growth?” he asked, stressing that: “We really don’t want to lend to people who can’t pay back and we don’t lend to people who aren’t in work.”
Mr Lamidey also said that reports highlighting the relatively high APR charged by payday loans lenders were misleading. This was due to the fact that most borrowers repay their loans almost immediately and only pay between £10-30 for every £100 that they borrow.