Regularly using payday loans creates 'cycle of debt'
20th May 2008
Consumers who regularly use payday loans could be doing so because they have a more "serious underlying debt problem", industry experts have said.
Debtline, a debt advice helpline, warned that these short-term, high-interest loans, designed to get consumers through until their next paycheque, are an expensive way of borrowing.
Beccy Boden Wilks, spokesperson for National Debtline, explained how regularly using payday loans can create a cycle of debt: "If you're paying it back the following month, you're basically spending your wages before you've got them. And the cycle carries on."
Ms Wilks advised that consumers who regularly use payday loans to finance their debt need to establish why their account is regularly overdrawn.
The advice service suggested that if a person's outgoings are more than their income it may be that they need to budget or re-evaluate their credit commitments or mortgage repayments.
With inflation currently at three per cent an increasing number of consumers are finding it a struggle to meet the costs of everyday household bills.
According to Moneysupermarket.com, the price comparison website, consumers' using short-term payday loans has increased by 55.4 per cent since September 2007.
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