The number of people in the UK taking out payday loans has quadrupled since 1996. This is despite some companies charging interest rates as high as 2,500% a year. With these high interests in mind there have been calls for the industry to bring in more safeguards to protect vulnerable lenders.
These figures on payday loans have been revealed by consumer watchdog Consumer Focus. The research suggests that as many as 1.2 million people are now taking out a loan of this type each year with combined borrowings now as high as £1.2 billion.
For many people taking out a payday loan is a simple way of getting short term credit. If the loan is paid back quickly then it can be a cheaper option than a credit card or an unauthorised overdraft. However if the loan isn’t repaid then debts can escalate very quickly.
There have been many cases of people taking out loans finding they get into financial difficulties. However the payday loans industry states that when managed properly the loans are an easy to understand and low risk option.
If you do find yourself short of money at the end of the month as you wait for payday then taking out a loan of this sort can be a good choice so long as you remember that it is only a very short term option.
