Debt warning over payday loans

Payday loans may be used by many as a last resort as they are easily accessible, but this can lead to problems, an expert has noted.

Director of partnership development at Credit Action Liz Dunscombe stated such loans can be "cheaper than an unauthorised overdraft" in some cases.

They also offer a chance to get money quickly in an emergency, which means people can tackle a problem immediately, she added.

However, Ms Dunscombe said the very speed and ease at which they can be obtained may be a problem, explaining: "The downside is the ease with which they can be obtained [means] that people do tend to use them perhaps not for emergencies and then they can't really afford to pay them back."

This might suggest that some of those who do get into trouble have borrowed on a whim and been able to push the deal through swiftly without having had time to sit down and consider whether the move they are making is a wise one or not.

People doing this may find they need debt help or even an individual voluntary arrangement, if they have let the problem fester for long enough with the high rates of interest charged on such borrowing.

Research out this week by payday loans firm InstantLoansDirect.com suggested those who opt for such borrowing tend to defy the stereotype of such loans being sought mainly by the poor and unemployed.

It showed 51 per cent of applications are from those with middle incomes of between £24,000 and £50,000, while 94 per cent of applicants were in full time work.

By James Francis