pay-day debt

Research by Consumer Focus suggests that 1.2 million people are now taking out a payday loan every year, borrowing a total of £1.2bn. For many people such a loan is a quick and efficient way of getting hold of short-term credit. If the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge. However, if the loans are rolled over, debts can quickly escalate. The number of people taking one out has quadrupled since 1996 according to the watchdog Consumer Focus. That is despite some companies charge interest rates of more than 2,500% a year.

But for many other people a payday loan is still the only legal option for short term lending, when money is tight and there is nowhere else to turn.