Payday loans help more than 1 million cover bills

By Joel Stanier

More than one million people in the UK are turning to payday loans to meet their essential living costs, according to the Independent.

And research by Santander indicates that three in ten people are turning to some kind of credit - including credit cards and overdrafts - to cover their bills each month, borrowing an average of £259 each.

But the 2% of the population who turn to payday loans are borrowing the equivalent of £1,836 each in total, demonstrating just how expensive this form of credit can be if it is used as a long-term source of finance.

Payday loans are designed to be repaid over a very short timeframe - and can be very useful when used that way, says a loans expert at All About Money. "Despite the bad rap they sometimes get, payday loans can be a lifeline for people who can't quite make their finances stretch until the end of the month. For example, if you have to choose between a £10 fee on a payday loan or a £35 fee for going into your overdraft, the choice is simple.

"But they can become very expensive if the debt isn't repaid on time, and if someone finds themselves taking out payday loans regularly it could indicate an underlying problem with their finances - in which case borrowing is not a good idea."

Una Farrell, spokesperson for the Consumer Credit Counselling Service (CCCS), said:

"This is very worrying indeed. If you start using credit for day-to-day expenses I just don't know where you'll end up, especially when payday loans are so expensive. Credit unions and even short-term lending from your bank could be so much cheaper."

"With so many people struggling at the moment, especially those from the lower end of the socio-economic spectrum, this shows just how big the market is."

Tags: debt, payday loans

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