About seven million people are turning to high-interest credit to keep a roof over their heads, research published today reveals.
Frighteningly, almost one in seven of those – just under a million people – have resorted to unsuitable payday loans to cover rent or mortgage payments in the past year.
As i warned last month, payday lenders are cashing in on the millions of people who are struggling with their finances and unable to borrow from mainstream lenders, such as banks.
The legal loan sharks charge extortionate interest rates of up to 5,000 per cent and many roll loans over, adding interest on interest, forcing people into a disastrous debt spiral.
A report from the insolvency trade body R3 in December predicted payday loan companies will see a surge in demand in the coming months.
The Office of Fair Trading plans to review the industry to ensure businesses are complying with responsible lending rules.
But Shelter's survey reveals that the scale of the problem is even worse than previously thought, with millions now at risk. Campbell Robb, chief executive of Shelter, said: "These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home."
Many have turned to overdrafts and credit cards, which, at least, can offer some time to repay. But almost a million have resorted to payday loans aimed at people who need short-term cash for a few days. And they are expensive. Anyone borrowing £100 could be charged £30, for instance.
The payday-loan firms point out their deals are not only convenient but could be cheaper than going into the red at a bank, once you've taken account of penalty charges and daily interest. But payday loans are so easy there is greater temptation to borrow.Reuse content