By Claire West
Since this time a year ago, there has been approximately a 50% increase on the number of GB adults who say they are likely to seek a payday loan in the next six months, up from 3.5 million individuals to 5 million today.
The payday loan can no longer be regarded as a niche form of credit.
R3 Council Member, Louise Brittain comments:
“It is staggering that in one year the number of people considering taking out a payday loan has increased by 50%, highlighting the payday loan phenomenon is here to stay.
“If used in the right way, to fill a genuine one-off gap in finances, a payday loan does have a place. However they are increasingly being taken on as a debt solution instead of a financial solution. We know from last year that one in three couldn’t pay off the first payday loan so had to take out another one — and now 12% of 18-24 year olds have prioritised paying back this debt over buying food in the past six months. This is surely not what the payday providers intended.”
Worryingly, their popularity is much more evident among 18-24 years (26% are likely to seek a payday loan in the next six months) while just 4% of those aged 45 and over are likely to do so. This comes at the same time as concern over debt levels plagues much of the population (59% are currently worried about their debt).
Louise Brittain continues:
“Debt has been normalised, attributable in part, to the clever marketing campaigns of the big payday lenders. These loan companies operate glossy websites and even sponsor football teams and are capitalising on a generational shift in attitudes towards saving and debt. Currently 29% of GB adults do not have any savings.
“However the problem with payday loans is you can end up paying much more later on. It seems younger generations will borrow money if they really want something — saving and waiting isn’t common place — many of these people tend not to have the credit rating to call at more traditional establishments, with more comfortable terms, and have therefore resorted to payday loans.”
An age old issue of how to spend limited funds has been given a modern twist with the arrival of payday lenders. In the past six months, 13% of the GB population have prioritised paying back these loans over ‘essentials’, such as buying food, clothes or paying for gas and electricity. Specifically 7% have prioritised paying back these loans over buying food in the past six months.This figure is higher amongst younger age groups; 12% of 18-24 year olds and 15% of 25-34 year olds have prioritised paying back a payday loan over buying food in the past six months.
Louise Brittain concludes:
“This is a million miles away from the supposed purpose of payday loans, which providers claim ‘smooth over financial peaks and troughs’. Instead, expensive loans taken with easy internet or smart phone access are forcing some debtors into making difficult choices.
“If money has to be spent paying back these debts ahead of food, clothing, gas or electricity then these loans aren’t doing their job, and are in fact only exacerbating a difficult situation. This is stands a greater chance of being resolved by seeking professional advice and considering all the options including a formal debt solution, above taking on further expensive credit.”