Research from consumer group Which? reveals the extent of the payday loan problems engrossing UK consumers. The statistics on the number of people using payday loans for essential household expenditure is worrying.
The watchdog found that more than 60% of the people acquiring payday loans are using the money for household bills, nappies, petrol and food. The statistics have been described as ‘alarming’ by Which? who oppose the high interest rates and penalty charges imposed by payday lenders.
Consumers who borrow money from payday lenders are often not aware of the charges involved in borrowing money from this type of lender, ultimately meaning people struggle to repay the money they borrowed along with the additional interest charge. When payments are late the costs increase. The original loan is ‘rolled over’ and further fees and charges are added, compounding the severity of the situation and making it even tougher for the person in debt to become debt free.
Which? found that 25% of their survey who used payday loans were not aware of the hidden costs involved in borrowing money from a payday lender.
Out of the frying pan
At Debt Support Trust we often help people struggling with payday loans and frequently they comment that they had no other choice but to borrow the money, but ultimately it’s been ‘out of the frying pan and into the fire’.
The research confirmed that 33% of people encountered greater money problems after agreeing to the payday loan and almost half received unexpected charges. This meant that more than half of people had to take out further loans with additional interest and charges being added.
Which? provided further research into payday loan practices by reviewing 34 payday loan websites. The consumer champion found that the majority of the websites failed to clearly explain the costs of borrowing a payday loan or the charges for being late in repaying the loan.
Debt Support Trust
If you are struggling to manage your payday loan debt we recommend contacting a debt advice charity. For face to face advice please visit your local CAB or for telephone help you can call Debt Support Trust on 0800 085 0226 today.