Payday loans warning over Christmas

Despite fewer people expecting to get into significant debt this Christmas, there will still be many who find themselves over-committed and in trouble…

Despite fewer people expecting to get into significant debt this Christmas, there will still be many who find themselves over-committed and in trouble in 2012, an expert has said.

President of insolvency industry practitioners’ body R3 Frances Coulson issued the warning after research by the organisation indicated a third of consumers will take a month to pay off debt caused by their festive spending, down from around half last year.

But, Ms Coulson warned, payday loans could still be a temptation for many and the consequences could be severe.

She remarked: “There are still huge numbers of people who will struggle to afford Christmas and may well look to short-term loans and credit cards.

“They should be wary of the high interest rates that often accompany these products, as this will leave them lumbered with Christmas debt long into next year.”

More positive trends identified by R3 include more people spreading their spending out over a longer period of time to avoid suddenly needing to borrow to meet their Christmas budgets.

However, the study also found 13 per cent of respondents saying they felt they would not be able to afford their bills at the end of December, a number rising to 16 per cent in London.

Director of the Debt Support Trust Stuart Carmichael recently stated that taking out payday loans is something his organisation would never recommend and noted recent research showing these are almost as costly as unauthorised overdraft charges.

He added that one of the key concerns about such deals is the way they can be rapidly applied for and agreed, meaning they can be taken on a whim without consumers having much time to stop and think about what they are taking on.

By Joe White

Tell others:

shortlink