Demand for payday loans on the rise

The number of people resorting to expensive payday loans has soared during the past month as consumers struggle to make ends meet in the face of rising living costs and stagnant wage growth.
By The Newsroom
Published 21st May 2011, 07:00 BST

Financial website moneysupermarket.com said it had seen a 58 per cent increase in demand for the loans since the May Day Bank Holiday, compared with the same period of April.

The group blamed the strong demand for the loans, which enable people to borrow small sums, often of as little as £75, for short periods of time to tide them over until they are paid, on the rising cost of living, as well as the recent run of bank holiday weekends.

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But it warned consumers to make sure the product was the most appropriate way for them to borrow money, as the loans can be expensive, with annual interest rates equivalent of around 2,000 per cent.

Someone who borrows £100 through one of the loans can expect to pay back around £125, often within 31 days.

Tim Moss, head of loans and debt at moneysupermarket.com, said: “It’s no surprise to see the demand for payday loans rise so sharply in the current climate.

“These products act as a barometer, giving a unique insight into the state of the nation’s finances.”