For a sizable number of British people, the easy availability of high interest instant cash loans is becoming a habit that is hard to kick.
The CCCS – the Consumer Credit Counselling Service reported an increase in the number of people taking out short term loans by a factor of six compared to the same month three years ago. Many of these people are also taking out loans from one payday lender so that they can pay off the debt to another short term loans provider.
PriceWaterHouse Coopers commented that the rise in short term loans like short term loans has come about on the back of the squeeze on credit availability elsewhere. The rapid increase in short term loans providers has defied the trend elsewhere in the British economy and reportedly the internet is crowded out by loans providers lending out loans from £100 to £2,000 for interest rates that can go up as high as 4000% in certain circumstances.
Payday loans are fine for a lot of people who need a small amount for a short period of time and are able to pay it back on time. Anybody else really needs to know in advance what they are letting themselves in for, especially if they need to extend the loan or have to default on the original loan. This is where the likelihood of interest rates start shooting up arises and people are likely to be dragged further into debt.
The chief executive at the Consumer Finance Association, John Lamidey, said that a lot of people are wary of taking on long term loans as they are unsure of how long their jobs are going to last or how much they are going to earning the near future. He said this why short term loans and their like were becoming so popular as people thought they could just take out short term loans for whatever it was that they needed to pay out for rather spending money on their credit cards.
The Debt Support Trust says that the average amount of debt was £1,200 per person and a significant amount of the money borrowed is not for cars or holidays or anything special, but for basic living costs. Many borrowers have actually got loans out from several loans companies at the same time and are using one to pay off another.