Younger people and the less well off are turning to high-interest forms of borrowing such as payday loans in a bid toclear debt, it has been claimed.
But Frances Walker of the Consumer Credit Counselling Service warned that this could lead to borrowers facing further costs.
“Our main concern … is that people take out these loans and roll them over from month to month,” she explained.
Ms Walker noted that young people are likely to fall into this habit as they probably do not have good credit records and find it harder to be approved for other forms of lending.
And the high-interest loans have become more prevalent as a result of the economic downturn, she added, remarking: “Payday lenders are a growing phenomenon in the context of the credit crunch.”
Total personal debt in the UK at the end of November 2008 stood at £1.456 billion, according to Credit Action.
By Jamie Price