Struggling Britons turn to payday loan firms

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Payday loan companies are expected to see a surge in demand over Christmas and next year as Britons struggle with their finances, says a report.

Insolvency trade body R3 found that seven per cent of people it surveyed, potentially equating to 3.5 million British adults, would be tempted to take out a short-term loan over the next six months.

The loans can result in interest rates of several hundred per cent being charged.

Consumers have been faced with high living costs and soaring bills, coupled with job losses, pay freezes and small pay rises.

The Office of Fair Trading is to carry out a review next year to ensure businesses are complying with responsible lending rules.

The R3 Personal Debt Snapshot found that 60 per cent of people were worried about their current level of debt, up by 21 percentage points on the same time last year and the highest level of concern recorded in the six reports R3 has produced on the subject.

Nearly half (45 per cent) of people struggle to make it to pay day, the study found.

This figure rose to 54 per cent of people in the North East and North West, where people appeared to be struggling the most.

The survey also highlighted concerns about 16 per cent of those surveyed who were dubbed “zombie debtors” – people who were only able to pay the interest on their debt, but not reduce the amount they owed.

A third of the 2,005 British adults surveyed thought their financial situation would get worse over the next six month.