There has been a 55 per cent increase in the number of people taking out payday loans since September last year, according to research from moneysupermarket.com.
Their study shows that as the price of essential items (like petrol and fuel) has continued to rise, so too has the demand for short-term payday loans to tide customers over until their next pay cheque.
Payday loans generally have a maximum term of 30 days, with a typical interest rate of 25 per cent for the month. Borrowing £250 to tide over until the next pay day means that you would have to repay an extra £62.50 on top of the initial loan amount.
Moneysupermarket’s Tim Moss says: “The rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day.
“As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are increasingly used to help those on a tight budget.”
Chiltern’s Nathan Gladwell says: “There’s far too much month for the money these days and desperate times are forcing consumers to take desperate measures – which is why people are turning to payday loans.
“Unfortunately, these types of loans usually carry hefty interest rates and can be a quick way to amass more debt. They may intend to be taken out for a month initially, but that quickly ends up being two or three and before you know it there’s interest on interest building up.
“A better way to control your budget when you’re struggling with finances is a structured repayment plan, which ensures you have enough money each month for all essential items and means you don’t take out another expensive loan to carry you through to the next payday.
“These informal arrangements help you to pay off existing debts whilst maintaining a basic standard of living, and avoid going deeper into the red.”