Payday loan borrowers ‘trapped in debt spiral’

Over 60 per cent of people who take out payday loans use the money to pay for household bills or other essentials such as food, nappies and petrol, according to a survey conducted by the Consumers’ Association, Which?

Which? says people are getting trapped in a ‘downward spiral of debt’, caught by exorbitant penalty charges because they cannot afford to pay back the loan on time.

Key survey findings

  • A quarter of those who took out loans said they had been hit with hidden charges such as high fees for reminder letters.
  • 1 in 5 were not able to pay back their loan on time.
  • A third of people experienced greater financial problems as a result of taking out a payday loan.
  • 57 per cent of borrowers were encouraged to take out further loans, and 45 per cent rolled over their loans at least once.
  • A third of people were ‘bombarded’ with unsolicited calls, texts and emails before they even signed an agreement.

Source: Press release 18 May 2012, Consumers’ Association

Links: Consumers’ Association press release | Guardian report

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Thanks for the info.