Payday loans are not the solution, warns Yorkshire finance specialist
A Yorkshire finance specialist has warned that payday loans can be a risky way to get extra money over the festive period as recent figures suggest 3.5 million people will consider taking out such a loan over the next few months.
The new research by insolvency trade body, R3, reveals that as 45 per cent of the population struggle to make it to payday, many will consider taking out a payday loan - a small, short-term loans designed to tide people over until they get their salary.
Phil Meekin, finance expert at Sheffield-based Wilson Field Ltd, one of Yorkshire’s premier insolvency specialists, says there is likely to be an increase in the number of people turning to payday loans as they struggle to cope with the financial difficulties that come during the Christmas period.
Mr Meekin said: “Payday loans are not the best way to resolve financial struggles. Many people mistakenly believe that turning to these payday loan companies is an easy option, they often appear to be more accessible than other professional organisations offering financial advice and debt solutions, but it is important that people are aware of the downfalls.”
R3’s research also shows that 60 per cent of people who had taken a payday loan regret the decision and 48 per cent believe the loan has made their financial situation worse. Only 13 per cent believe their payday loan had a positive impact on their finances.
Mr Meekin added: “If the money is paid back as soon as the next salary comes in, this type of lending can be cheaper than paying out on an overdraft or a credit card charge. The problems come when people are still facing the same money difficulties even when payday arrives.
“There is a risk that people will turn to payday loan companies more than once, and these loans can sometimes come with interest rates of up to 4000 per cent. Some , known as ‘zombie debtors’, struggle to keep on top of their borrowing and end up only being able to pay back the interest on the loans.
“If struggling through the month to payday is a regular occurrence, which can often be the case at this time of year, people should seek financial advice instead of turning to ‘quick-fix’ high interest loan options.”
Wilson Field, based on Ecclesall Road South, Sheffield, has a team of friendly and experienced staff on hand to offer expert advice on how to regain control of individual debt problems.
The warning from Wilson Field comes shortly after a study by Professor Paul Mosley and Dr Pamela Lenton of the University of Sheffield found that 40,000 people in Sheffield are trapped in a debt because they cannot borrow from high-street banks and are forced into more expensive ways of borrowing to afford day-to-day necessities.
Acknowledging the study at a council meeting yesterday, Coun Ben Curran gave a Notice of Motion proposing that Sheffield City Council calls on the coalition government to give local authorities the power to veto licences for high street credit agencies where they could have negative economic or social impacts on local communities.
To speak to an expert from Wilson Field’s free advice line call 0800 458 3320
