More than one million people take out payday loans
The number of people taking out a payday loan has quadrupled since 1996 according to the watchdog Consumer Focus.
That is despite some companies charging interest rates of more than 2,500% a year.
The organisation is now calling on the industry to bring in more safeguards to protect vulnerable borrowers.
”Payday loans are a valid form of credit and it’s much better for people to take one out rather than go to a loan shark,” said Sarah Brooks, head of financial services at Consumer Focus.
“But we do think there needs to be a limit on the number of loans people take out and how many loans they are able to roll over.”
Research by Consumer Focus suggests that 1.2 million people are now taking out a payday loan every year, borrowing a total of £1.2bn.
For many people such a loan is a quick and efficient way of getting hold of short-term credit.
If the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge.
However, if the loans are rolled over, debts can quickly escalate.
The British Bankers’ Association (BBA) claims its members are already being as flexible as they can.
September 1, 2010
Tags: borrowing, Credit Crunch, Interest Rates, payday loans, sub prime loans Posted in: Uncategorized
3 Responses
Interesting article. At the end of the day we need responsibility from all lenders and borrowers, but this is difficult to achieve. I think it is a little bit misleading to quote 2,500% per year interest as they aren’t meant to be loans which are paid off quickly.
great…
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