Cost of living fuels payday loans rise
Posted 2008-05-15
The number of payday loans being taken out by consumers has increased by 55 per cent since September last year, new research has found.
A survey by Moneysupermarket.com has found that the rise in cost of utility bills and food has seen payday loans become a more popular option for borrowers in need of short-term credit.
However, Tim Moss, head of the price comparison site, warned that such forms of credit are only beneficial if the loan is for a short period of time and advised consumers to borrow from family members if the money is needed over a longer period of time.
"As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are increasingly used to help those on a tight budget. They are a bit like a taxi - convenient for short-term journeys," he said.
Payday loans are designed to cover a persons expenses until their next pay day.
June 12th, 2008 at 2:30 am
Lenders say these loans are often the only option available to consumers with bad credit or who cannot get a bank loan, credit card, or other lower-interest alternatives. Critics counter most borrowers find themselves in a worse position when the loan is due than they were when they took the loan, with many getting trapped in a cycle of debt.