Almost half of people struggling with debt say their problems are a result of payday loans.
Debt charity The Debt Advice Foundation (DAF) has recently claimed that 41% of people struggling financially are blaming high-interest payday loans as the reason for their problems.
The payday loan industry is continuing to rise, despite high profile warnings against such companies. Online searches for 'payday loans' has doubled in the past 12 months.
According to DAF research 25% of the people who have taken out a payday loan needed the money to buy food or essentials for their household, and 44% of them using the loan to pay off other debts.
However John Lamidey, chief executive of the Consumer Finance Association, refuted the charity's claims, stating:
“We would refute every assertion in the DAF release. Payday loans are about the clearest and most simple borrowing possible. You borrow a sum, you repay a fixed amount at a set date. To assert that around half of borrowers do not understand the cost is ludicrous.
“Payday loans compare favourably to many consumer alternatives, even when expressed as annual percentage rates. For example, payday loans cost £10-£30 per £100 borrowed. So, borrow £200 from a CFA member and clear the debt on day 30 for, say, £250. The APR is 1413.1%. Borrow £200 on an unauthorized overdraft (where there is no requirement to show an APR) and clear the debt on day 30 for £350. The actual APR of the overdraft transaction is 90,888.9%.”
Debt Free Me believe that pay day loans have their place, if you understand all of the risks and pay them back as soon as possible then in some instances a pay day loan can be better value for money than taking out an unauthorised loan, or credit card charges, and safer than getting cash from a loan shark.
If you are struggling with debt then contact us now for no obligation advice to find the best solution for you.
