Money Mayday as Brits Turn to Payday LoansBy Moneysupermarket.com, PRNE
Tuesday, May 17, 2011
Demand for Payday Loans Soars by 58 per cent Since the May Day Bank Holiday
CHESTER, England, May 18, 2011 - The rising cost of living combined with the recent run of expensive bank
holidays has led to a 58 per cent* increase in demand for payday loans
through moneysupermarket.com (www.moneysupermarket.com/loans/),
compared to the same period in April. The UK's number one comparison site is
warning consumers to make sure a payday loan is the most suitable product for
their circumstances and understand the terms and conditions before applying;
otherwise they may find themselves in financial difficulty.
Payday loans are a form of short-term borrowing aimed at struggling
consumers who need to bridge the gap until their next pay day. The amounts
offered to consumers by payday loan companies usually range from GBP 100 to
GBP 300, but this amount can go up to GBP 1,000 in some cases. If an
application is successful, money can be transferred into the borrowers
account on the same day, making them extremely attractive to those that need
a quick cash injection.
Due to their short terms nature pay day loans carry extremely high
interest rates, some as much as 2,000 per cent when converted to an annual
percentage rate (APR). These rates vary enormously, but typically, customers
borrowing GBP 100 will have to pay back around GBP 125 and the term of the
loan is usually set at 31 days - a GBP 300 loan is likely to cost them around
Tim Moss, head of loans and debt at moneysupermarket.com said: "It's no
surprise to see the demand for pay day loans rise so sharply in the current
climate, and particularly around bank holiday periods when people have been
spending more. These products act as a barometer, giving a unique insight
into the state of the nation's finances, and as people continue to feel the
pinch, we can expect to see the popularity of these products continue to
"When you convert the interest rate of a pay day loan to an APR, the
costs involved can appear exorbitant, however, because of their short-term
nature expressing the rate as an APR can be misleading. For consumers who
need money quickly, it can often be cheaper to borrow using a payday loan
than exceeding their overdraft limit without authorisation from their
"However, the use of payday loans comes with a huge caveat. There is a
real danger that customers could fall into a spiral of debt where they have
to take out a loan each month just to make ends meets. Borrowing GBP 100 one
month means paying back GBP 125 the next and anyone struggling to stay out of
the red could find that taking out a pay day loan ultimately makes the
problem worse. Payday loans are not suitable for customers looking for longer
term credit or unable to pay off the debt within a few days.
"The golden rule for consumers is not to borrow money unless it is
absolutely necessary. Consumers feeling the pinch need to sit down, go
through their finances and try to work out where they can reduce their
outgoings before considering any kind of loan. If you are a regular user of a
payday loan, then you should really look at your circumstances. If you are in
a position where you rely on them regularly, then I would advise seeking debt
advice from one of the free debt advice charities who can help bring your
finances back on track."
Notes to editors:
*moneysupermarket.com experienced a 58% increase (2 May - 12 May 2011) in
the number of payday loan enquiries compared to the same period last month (2
April - 12 April 2011)
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Tags: Chester, England, May 18, Moneysupermarket.com, United Kingdom