Poor families carry £82m debt burden

It is estimated that people on low incomes collectively borrowed 29m from illegal lenders to fund the festive season.

But once interest rates, which average 825 per cent, are taking into account, they will end up having to repay around 82m, according to housing association Circle Anglia.

The group, which commissioned the research after noticing an increase in the number of residents being targeted by loan sharks, said it thought this Christmas had been the worst in a generation for borrowing from illegal lenders.

It said the average person had borrowed nearly 300 to cover the cost of the festive season, but they would end up paying back more than 800 and were likely to still be in debt in the run up to Christmas this year.

The report, produced by think tank the Financial Inclusion Centre and published today, claims there had been a 22 increase in the number of people using loan sharks during the past three years, with an estimated 200,000 people turning to them in 2009.

Separate research by Wherry Housing Association in Norfolk found that one in four tenants had been offered a cash loan.

Nine per cent said the amount they owed kept growing even through they made repayments and three per cent were threatened with violence for non-payment.