Survey reveals payday loan dangers

A survey by an insolvency professionals' body has indicated millions of Britons are thinking of taking out a payday loan in the coming months, som…

A survey by an insolvency professionals' body has indicated millions of Britons are thinking of taking out a payday loan in the coming months, something that could leave many with debt management problems.

The R3 research discovered 3.5 million are thinking of such action, at a time when 45 per cent admit they are struggling to make it through to their next payday.

But those who imagine a payday loan will ease their worries are usually mistaken, according to the survey, with only 13 per cent saying it made them better off.

In contrast, 48 per cent said it worsened their finances and 60 per cent regretted the decision to take on such a loan.

R3 president Frances Coulson said: "Payday loans are not the best way to resolve debt struggles. We know that many who take them out find them to be a negative experience, often escalating financial troubles."

Ms Coulson went on to warn that there are an increasing number of "zombie debtors" in the UK – people who can only manage to pay the interest on their debt and not actually reduce the amount they owe.

The R3 study found this now accounts for one-in-six consumers, including 11 per cent barely maintaining their credit card debts and nine per cent doing likewise with their overdrafts.

Using a payday loan is extremely unwise due to its high cost, director of the Debt Support Trust Stuart Carmichael recently commented.

He said research has proved they are almost as costly in interest terms as unauthorised overdrafts.

By James Francis
 

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