Payday Loans Boom As Recession Bites

Monday, 26 January, 2009

Payday loans, which provide borrowers with quick and easy cash but can be one of the most expensive forms of lending, are becoming a "growing phenomenon" as more people find that traditional credit lines have been closed off by the credit crunch.

Frances Walker of the Consumer Credit Counseling Service (CCCS) said providers of these types of loan typically target the less well-off and younger people who otherwise find it hard to secure finance.

However, she warned that the annual percentage rate (APR) attached to some of these loans can be "very high" and borrowers can find themselves in trouble, particularly if they let the loan roll over from month to month.

According to research from uSwitch.com, some payday loans have APRs of up to 9,889.3 per cent, making them one of the costliest forms of borrowing in the UK.

It added that a consumer taking out a payday loan of £750 could end up owing £1,687.50 if they defer repayments for five months.

Source: fredericksburg.com