Survey Highlights Danger of Payday Loans Amidst Consumer Debt Worry

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22nd June 2012 13:17 - Financial Services

Insolvency specialists R3 have conducted a survey which reveals the dangerous trend of Britons taking out payday loans just to get by – with  some companies charging as much as 4,000% on their interest rates, debt professionals are urging serious caution.

In total, 7% of the people surveyed, which is equivalent to 3.5 million adults in the UK, are considering taking out a payday loan in the next six months. This ties in with the discovery that 45% of people are struggling to make it to their next monthly salary, a figure which is 7% higher than this time last year.

Nevertheless, 60% of the people polled are now worried about their current level of debt, which is the highest level that R3 has recorded in all six of the Personal Debt Snapshot surveys they have thus far conducted.

Payday loans, which are small, short-term and unsecured, can be a cheaper solution than unauthorised overdrafts or credit card charges if people are able to repay them on the agreed day. But if the loans are rolled over, with interest rates typically around the 1,000% mark, their cost can rapidly spiral out of control.

They are coming under increasing fire from MPs and pressure groups, who are calling for tougher regulations to govern this growing short-term loan industry.

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