Payday borrowers warned to consider other options first - Turn2us

Latest research from Turn2us and the Consumer Credit Counselling Service (CCCS) has revealed that people are turning to payday loans to bridge a financial gap in their household income, before checking out other easier and less-costly ways to maximise their income.

• Over a quarter (27 per cent) of people who took out a payday loan didn’t look into any other financial solution ahead of taking out the fast loan
• Almost half of people (48 per cent) who are currently not working and have taken out a pay day loan have never checked their welfare benefits eligibility
• Over half of those (51 per cent) who have taken out a payday loan regret their decision to take out their first and around a third (30 per cent) are worse off since they took it out. However, over two-thirds (68 per cent) of people who have taken out a payday loan in the last 12 months have taken out two or more and over one in six (17 per cent) of people have taken out a staggering seven or more loans
• Over two-fifths (43 per cent) of respondents who work full time said they took out their first payday loan because they needed the extra cash before payday, with nearly a quarter (24 per cent) reporting that they needed the money to pay for necessities, such as food for their family. However, people who are unemployed are nearly twice as likely to have taken out a payday loan – than those who work.

Alison Taylor, Director of Turn2us, said: “Financial hardship can be devastating for individuals and families. We know that people can be reluctant to turn to charities or claim welfare benefits when times get tough, mostly because of the perceived stigma attached. Of the 13 million people living below the poverty line in the UK, only 7.6 million are claiming state support. So with £19 billion in state benefits going unclaimed each year, we would urge anyone thinking about borrowing a payday loan to find out if they are entitled to any financial support first and avoid unnecessary debt.”

Delroy Corinaldi, CCCS Director of External Affairs, said: “Payday loans can be an extremely expensive way to borrow, and this kind of debt can quickly spiral out of control.  This research shows just how many people are turning to expensive payday loans even though they may be entitled to welfare benefits that they are not aware of.  The key message for anyone struggling to cope is to consider all of your options, and seek free advice from a charity such as Turn2us or CCCS.”

If you are struggling financially, you can use Turn2us to access a quick and easy Benefits Calculator to work out which welfare benefits and tax credits you might be entitled to and a Grants Search database giving access to over 3,000 charitable funds.

Read the Turn2us press release about payday loan research

Update 5 November 2012

CCCS is now called StepChange Debt Charity (link opens in a new window)