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New research has revealed that 44 per cent of people have used a pay day loan in the last 12 months to pay for everyday essentials.
Pay day loans are often advertised as being quick and convenient ways of borrowing money when you’re in between paydays. But while it can be very easy to secure a pay day loan, they do come with high interest rates. And, if you aren’t able to repay it on time you may find that you have to pay additional interest and charges.
If you have taken out a pay day loan, you’re not on your own. New research* conducted on our behalf found that over 3.5m people across the UK used this type of borrowing in the past 12 months. And interestingly, 44 per cent of these people used it to pay for everyday essentials, such as food and travel, suggesting they had no other option … or at least thought they didn’t.
The dangers of pay day loans
Although pay day loans can seem convenient, they can quickly turn into a financial nightmare if you can’t repay back what you’ve borrowed. This is because many pay day loans come with high interest rates, and as we’ve mentioned, if you can’t make your repayment deadline, the amount of money that you owe may increase quickly.
If you’re using a pay day loan to pay for everyday essentials, it may be time to re-evaluate your finances. Having to use a pay day loan in order to pay for such necessities as food or heating suggests that the income that you do earn is not stretching far enough. You can use our handy budget planner to help you do this.
As soon as you know that you will have a problem paying back your payday loan, it’s important to contact your lender. Don’t be afraid to do this … all lenders must abide by a certain set of rules that are put in place to protect you by the financial watchdog the FCA. And part of this involves helping people who find themselves in financial difficulties.
These include treating you fairly and with consideration, halting the repayment of your debt for a certain amount of time while you work out a repayment plan, and directing you to sources of debt advice. Just in case your lender is reluctant to reply when you contact them, keep evidence of any letters or emails that you send to your lender and note down the details of any phone conversations that you have with them.
If you do get through to them, your lender may suggest that you extend the period of your loan to the next month, but in doing so you may have to pay more charges and further interest. If you need to extend the period of your loan more than once, it may be worth seeking the advice of a debt expert to fully understand all of your options.
One of our expert advisers will be able to listen to your situation and discuss the different debt solutions that are available (fees are chargeable on some solutions) to you. The advice that they give you could just help to halt this cycle of debt from continuing.
*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 20th January and 27th January 2015, of whom 635 were in Scotland. Figures have been extrapolated to fit ONS mid-2013 population estimates of 50,371,000.
by Shelley BowersBack to blog home