As household finances continue to feel the squeeze, more and more families in Scotland are turning to short term loans in order to make ends meet on a monthly basis.
Firms specialising in short term loans have been reporting demand from middle-income families has risen, leading to support to restrict the interest rates these payday advances charge. The number of people in Scotland seeking aid after taking out short term loans that have led to increased debt has been on the rise over the past few months, according to Citizens Advice Scotland.
The increased numbers of distressed Scots has led to the government springing to action, with the Scottish parliament reviewing a bill in the next few weeks that could introduce limits on the interest rates currently charged on repayments of short term loans. However, the sector is indicating strong growth while pressures continue to mount on household finances.
Both middle-income and high-income earners are now accounting for the lion’s share of several firms specialising in short term loans, such as InstantLoansDirect and Wonga. More than 50 per cent of those taking out loans earn anywhere from £25,000 and £50,000 a year, according to InstantLoansDirect, while the firm stated that those earning more than £50,000 account for 19 per cent of their customers.
90 per cent of the firm’s customers are not only employed full-time but also borrow £250 on average, which is close to the £300 maximum loan amount offered by the company. Meanwhile, 75 per cent of Wonga’s customers have access to credit cards, overdrafts, and other mainstream credit options, with a Wonga spokesman stating that the firm’s typical customers are young professionals who earn close to the average national income.