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Payday borrowers warned to consider other options first

Date: 31 July 2012

Update 5 November 2012

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

Press release

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, and 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.

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.”

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.

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.”

When asked if they had sought alternative sources of help before turning to a payday loan lender, over a third of respondents (35 per cent) said they tried to take out or extend their bank overdraft, while over one in four (29 per cent) tried to take out a new credit card or extend the limit on their current credit card. A quarter (26 per cent) asked friends or family for help first.

Turn2us, part of national charity Elizabeth Finn Care, helps people access the money available to them – through welfare benefits, charitable grants and other help. CCCS helps 400,000
people every year with their debt problems.

Individuals can go to www.turn2us.org.uk to access a quick and easy benefits calculator to work out which welfare benefits and tax credits they might be entitled to and a Grants Search database giving access to over 3,000 charitable funds.

CCCS provides free, impartial and independent debt advice via its freephone helpline on 0800 138 1111 and via its online debt counselling tool.

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Notes to editors

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 505 adults who have taken out a payday loan. Fieldwork was undertaken between 20th - 28th June 2012. The survey was carried out online. The overall figures have been weighted and are representative of all GB adults (aged 18+).

About Turn2us

  • Turn2us is part of the national charity Elizabeth Finn Care.
  • Turn2us helps people in financial need gain access to welfare benefits, charitable grants and other financial help – online, by phone and face to face through our partner organisations.
  • The Turn2us free, accessible website - www.turn2us.org.uk is designed to help people access the money available to them – through welfare benefits, charitable grants and other help.
  • The website has a number of tools to make the process simpler, including a grants search, benefits calculator and ‘find an adviser’ tool to help locate someone to speak to.

About CCCS

  • CCCS’s ethos is to help the “can’t pays”, not the “won’t pays”, and does not condone debt avoidance. CCCS always aims to help its clients pay back what they owe, in a realistic timescale and manner that is suited to each individual’s situation.
  • CCCS is self-funding. Lenders share with the charity the benefit they receive from its operation, making a donation from the money repaid to them. This allows CCCS to retain its independence and ensure that its advice is always in the best interest of the client.
  • The CCCS free phone helpline 0800 138 1111 is open 8am to 8pm, Monday to Friday and 9am to 3pm on Saturday.  CCCS Debt Remedy is available at Consumer Credit Counselling Service website (link opens in a new window). 

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For more information and to organise spokespeople quotes or interviews, please contact:

Emma Lamberton, Press & Campaigns Officer on 0208 834 9259 or emma.lamberton@elizabethfinn.org.uk

Update 5 November 2012

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

 

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