Payday loan popularity increases

July 15, 2008

Over recent months many consumers have faced increasing difficulties when it comes to getting finance of any sort, with the global credit crunch resulting in far tighter lending criteria and far tougher credit conditions. Many of those looking for a loan have found that they are unable to get finance from a mainstream lender, particularly of they have damaged credit or are on low incomes, and according to some industry officials this is resulting in a larger proportion of consumers turning to payday loans in order to fund shorter term emergencies.

Payday loans are offered to people in employment, and one of the reasons why they are very popular is that usually no credit check is carried out, although the applicant has to prove their employment, address, and the fact that they have a bank account.

Payday lenders usually offer up to around £1000 based on financial status and income, and the interest charged can be high but is based on a flat fee per £100 borrowed. Whilst borrowers have to repay the loan within thirty days, some do allow the loan to be rolled over to the following month providing the interest charges are paid again.

One industry official expressed concern that some people who are taking out these payday loans on a regular basis may be living beyond their means, stating: “Are you paying out more than you get in each month? If you are, then you need debt advice, to see where you can make cutbacks. You may need to negotiate smaller payments with your creditors…or your mortgage lender.”

Since September of last year, which is when the global credit crunch swept across the UK’s financial market, the take up of payday loans has increased by around 55% in the UK.

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