Personal loans: More people borrowing in short term

The number of people taking out expensive pay-day loans has quadrupled in four years, says a consumer watchdog.

Consumer Focus said banks needed to offer affordable short-term loans as alternatives, as well as recommending stronger safeguards to protect consumers from spiralling payday loan debts.

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In its study – Keeping the Plates Spinning – Consumer Focus estimated the number of people using payday loans, short-term borrowing to tide someone over until their next payday – has increased four-fold since 2006 to 1.2 million people, borrowing a combined 1.2bn.

Marie Burton, financial services specialist at Consumer Focus, said: "Demand for short-term borrowing has significantly increased despite the eye-watering interest rates charged by some payday lenders."

"Payday loan charges typically range from 13 to 18 interest for every 100 borrowed.