Consumers are increasingly turning to short-term loans charging interest of more than 1,000 per cent to tide them over until they get paid. The number of so-called payday loans taken out by Britons has more than doubled in the past ten months as shoppers struggle to cover their monthly bills, figures calculated for The Times show.
The growing strain on consumers' wallets prompted by soaring fuel and food prices has caused a boom in business for lenders of short-term loans at high rates of interest. The number of deals taken out in the UK has risen by more than 130 per cent since last August, according to figures from Moneysupermarket, the price comparison website. These payday loans are already popular in the US and have been blamed for exacerbating the housing crisis there.
Payday lenders, such as Payday UK, Express Finance and Pounds Till Payday, offer loans of up to £1,000. Payday UK demands that £125 be repaid for a £100 loan, or £937.50 for a £700 loan. The loan is usually paid off within a couple of days, as soon as the borrower's wages are paid into their account.
Payday UK said that the typical annual percentage rate (APR) for its deals was 1,355 per cent. The typical rate for a credit card is 20 per cent, while a high street bank charges about 18 per cent on an overdraft.
Source : business.timesonline.co.uk/
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