Debt management need ‘being increased by payday loans’

The use of payday loans is putting a growing number of people into unpayable debt situations, an expert has said.

Speaking on the BBC Radio 4 Money Box podcast, Lyn Jones of the National Debtline said the organisation has been tracking the tally of debt cases linked to such lending – with a very clear pattern emerging.

She said: "We started keeping figures towards the end of summer last year, at which point we were getting roughly 200 calls a month. In October of this year we were receiving roughly 1200 calls a month. That's a really big increase in people who are struggling to repay those types of loans back."

Ms Jones said that while it is possibly a viable option for some to use such loans, the reality is that for many people they are unaffordable and the task of trying to pay them is too much.

This means rolling them over – incurring a fee to do so – as well as the interest that follows from having another loan on top, something the expert said is a common cause of such borrowing spiralling out of control.

People who have been taking out payday loans tend to be the most indebted of all, according to Citizens Advice.

Its chief executive Gillian Guy noted this week that 40 per cent of those with a payday loan also have another high-interest debt.

Furthermore, she added, while the typical indebted CAB client without a payday loan has five debts, for those with such lending it is eight.

By James Francis