by Mark Johnston
Against a back drop of rising unemployment, frozen wages and rising living costs, it seems family finances are under greater pressure than ever. These conditions make it increasingly difficult and for some, near impossible to make ends meet.
When finances are shaky and households are slipping further in to debt things can quickly enter a downward spiral. In the worst case scenarios, this decent in to debt can lead to bankruptcy and even homelessness. It is therefore no wonder that many people are turning to payday loans to survive.
Surprisingly, more than 1 in 7 of those interviewed for the survey admitted that they had used credit at least once to meet their monthly mortgage payments or rent in 2011. With around 48 million adults in the UK this means that at least 7 million were forced to borrow money merely to keep a roof over their heads!
Around 1 in 8 people have resorted to borrowing money from a payday lender since the credit crunch in 2007, according to an online survey.
In addition, according to a group of insolvency experts, millions of Britain’s are likely to take out a loan that has a high interest rate attached to it over the next 6 months.
Figures from the insolvency experts also show that of those people they surveyed, 45% of them struggled to make their finances last until their next pay day.
However, consumer finance association member, John Lamidey, who works with payday loan businesses, disputes all of these figures.
These startling survey results come in the wake of news that more than a million UK home owners will see the cost of their mortgage payments rise in the very near future if they have not already. Therefore the fear by many is that as household budgets are stretched even further still by rising mortgage costs; more people than ever will seek out payday lenders to cope with the increased cost of living.
Payday loans are short term, small, unsecured loans that are designed to help people stretch out their finances until they reach their next pay day. These particular loans can in most case often be cheaper than an overdraft or credit card penalty, providing it is paid back promptly.
But these financial ‘saviours’ are loaded with a staggeringly high interest rate, therefore if borrowers are unable to pay off the loan on the next pay day the are then ‘hammered’ with huge interest payments.
One of the biggest loan companies, Wonga, has an annual percentage rate (APR) of 4,214%. In comparison, regular banks and building societies charge up to an average 8% APR.
Although this may seem like daylight robbery, these companies work within the law.
Therefore while it is vital to keep a roof over your head, expensive borrowing like this can easily become unsustainable and will then eventually make the sit
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