Warning over payday loans

Consumers have been warned that severe debt problems are likely to arise as a consequence of taking out payday loans.

Media officer at th…

Consumers have been warned that severe debt problems are likely to arise as a consequence of taking out payday loans.

Media officer at the Money Advice Trust Paul Crayston commented: "I would say no one takes a payday loan out of choice, they take it because they're forced to or are unaware of other alternatives."

He added that the chief danger is that the fast turnaround time involved in such loans means there are no credit checks done and this can leave people faced with repayments they cannot afford to make.

Failure to pay back the loan on time will create a "difficult situation" in which the interest and amount owed piles up.

The comments come after PricewaterhouseCoopers' Precious Plastic 2012 report was published this month, showing that while consumers are spending less on credit cards – which in some cases may be due to bad credit that stops them applying successfully – many are increasingly turning to alternatives like payday loans.

By Joe White

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