• 01616 966 229
  • Request a callback
Stephensons Solicitors LLP Banner Image

More of us are using payday loans that ever before

According to a report released by R3, the Association of Business Recovery Professionals, payday loans are now twice as popular in the UK as loans from credit unions. The statistics in the report indicate that nearly 2 million people have recently used a payday loan – that’s 4% who say they have taken out a payday loan in the last six months, compared to 2% who have taken a loan from a credit union. Although credit unions used to be seen as the default position for those in need of quick personal finance, it would seem that payday loans have now overtaken credit unions and more people are turning to them than ever before.

The 25-34 years old age group is the one in which payday loans are the most popular overall and 8% of those surveyed by R3 in this age group said they had taken out a payday loan in the last six months. The R3 survey also indicated that individuals were now more likely to take out a payday loan, with the number of people saying they intended to obtain one in the near future on the rise for the first time since September 2012. According to Phillip Sykes deputy vice-president of R3, “While the appeal of payday loans may have dimmed, a significant chunk of British adults still feels that payday loans are their only option to make it from week-to-week or month-to-month.”

The recession in the UK has caused problems for many households and combined with benefit cuts this has left around 43% of British adults admitting that they often struggle to make their money last until the next payday comes around. There are a number of reasons indicated for this, including the rising cost of food, as well as energy bills and transport costs. Given the problems many people have at the moment when it comes to getting from one payday to the next, it’s easy to see why payday loans can seem like a good idea at the time. However, they are often more trouble than they’re worth and the high interest rates they attract can mean that taking out a payday loan is simply another monthly payment that cannot be met.

Problems arise if the loan cannot be repaid – repayment is usually made by direct debit at the time that the next salary payment comes in, along with the interest that is owed. However, if the repayment can’t be made then the loan might have to be reborrowed, which then incurs another month’s worth of interest on top of what has already been charged. As payday loans are often a last resort solution, sometimes borrowers overlook essential affordability calculations and end up without enough salary left to live off after the loan has been repaid. This may mean a new loan is required almost as soon as one is repaid and so a further cycle of debt is begun.

However, although there is no quick fix, there is a way out of the payday loans debt cycle. If you are in trouble with payday loans then feel free to give a member of our team a call – we may be able to provide advice to help get you back on your financial feet.