Becoming debt free ‘a good way to avoid payday loans’

Those who are left seeking a payday loan should in future ensure they try to get debt free and never need to take such action again, a financial expert has said.

Chartered financial planner at Informed Choice Martin Bamford described such means of obtaining credit as a "last resort" that nobody should consider until all alternatives have been exhausted.

People should even ask friends and family for help or an employer for an advance on wages before resorting to such "hideously" costly lending, he argued.

Mr Bamford added: "If people do use payday loans, they absolutely must be a short-term solution because once they become anything longer than a few days they do become ridiculously expensive."

And he advised people to "live within your means so you avoid it ever happening again".

Such strong words may indicate the potential danger people can face from taking out such borrowing, as it may become difficult or even impossible to pay, not least if the full cost cannot be cleared in a month as arranged.

Those who do get themselves in such debt may find it and other money they owe spirals up beyond the £15,000 mark, which would mean an individual voluntary arrangement (IVA) may be considered.

An IVA can freeze interest on debts and cut monthly repayments, which are then made over a period not exceeding five years, at the end of which any remaining debt is written off.

But this can only happen if at least three quarters of creditors agree to the deal.

Insolvency Service figures have revealed the number of IVAs taken out in England and Wales in the second quarter of this year was 12,143, more than the number of bankruptcy cases (11,113).

By Joe White