Number of payday loans quadruples
Number of payday loans quadruples
- Monday, 16 August 2010The number of consumers taking out a payday loan, which could have interest rates of 2,000 per cent, has quadrupled over the last four years, suggests new research by Consumer Focus.
Taking out a payday loan could lead to
debt problems if the payment is deferred as large amounts of interest may be accrued as a result.
Consumer Focus estimates that 1.2 million people have turned to a payday loan since 2006 and have borrowed £1.2 billion in total.
The firm urges banks to offer consumers affordable short-term loans as an alternative so that borrowers will not need
debt help in the future.
Marie Burton, financial services specialist at Consumer Focus, said: "With the credit crunch, demand for short term borrowing has significantly increased despite the eye-watering interest rates charged by some payday lenders.
"Such expensive rates can leave consumers who defer payments, or take out repeat loans, caught in a debt trap."
Last year, the average size of these loans, which are typically repaid when the consumer gets their wages, was £294.
Compass has recently launched a campaign to urge the government to impose a cap on the amount of interest that money lenders can charge.

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