Typing ‘payday loans’ into an internet search engine returns a plethora of information and reviews on payday loan companies (both positive and negative). It can, therefore, be extremely difficult to decide on whether a payday loan will provide the best financial support option for you. This article provides advice on payday loans by reviewing some of the statistics circulating both today and historically. We hope that the information we present will enable you to make an informed decision when applying for a payday loan. For further details, please check our direct lender.
Research conducted by the Coop bank
New States Man reported that, worryingly, 5% of British consumers accumulated debt through a payday loan in 2011. In January 2012, more people were searching for payday loans on the internet than mortgages and credit cards (4% each). These statistics not only highlight the popularity of payday loans around that time, but also hinted at a worrying future. If more people were interested in high-interest payday loans than other, well respected forms of finance (namely mortgages and credit cards), a worrying picture was painted in regards to the financial position of the British consumer. These statistics were not only representative of the British consumer. In the US, 12 million people annually were in long-term debt as a result of payday loans, according to the Centre for Responsible Lending. Another striking observation from those findings, is that the US retail banks seemed to cash in on the consumer too – offering payday loans directly.
Fast forward four years, and how has the position changed? In March 2016, the Citizens Advice Bureau (CAB) publication ‘Payday loans: An improved market?’ (Overviewofthetrendsinthepaydaymarketreport.pdf) discusses how the client perception of payday loans has changed. Since the price cap in January 2015, 45% less people have sought advice from the CAB. In between 2013 and 2016, there has been a reduction of 86% advice given.
These statistics may well be a result of the impact on the payday loan companies following 2013 regulations. The report indicates that just 42% of the 126 payday loan firms were authorised to continue operations in 2013. 20% of the 126 remained active pending the outcome of their applications to continue, whilst the remaining 38% either liquidated or withdrew from the market. These statistics suggest that payday loan companies (prior to 2013) had unrestricted rules on their working practices, enabling them to charge high rates of interest to the British consumer.
What, then, do these statistics mean for you as a consumer? Well, from my experience, payday loans have always had a negative stigma attached to them, as they conjure up images of loan sharks and their ‘heavies’ breaking down someone’s door to break their kneecaps. To some people, a payday loan can feel like the final option, and recent representations of desperate characters in advertisements and soap operas (e.g. Eastenders), hardly helps with this stigma.
However, after the regulation and price caps added to the payday loan market in 2013, the idea that payday loan companies operate with a ‘bully-boy’ attitude seems to have diminished somewhat. Regulation also now means that a ‘rollover’ loan can only happen once. The ‘rollover’ refers to a situation where lenders allow consumers to repay the debt later on, after they are unable to pay the loan back in line with the initial agreement. This prevents further charges from being added on and, as lenders are unable to automatically apply to your bank directly for payment, also prevents late or non-payment charges from being accrued on your account. There is also a 0.8% cap on the interest that can be charged per day. If a lender is suspected of foul practice, further advice is available from both the money advice service (moneyadviceservice.org.uk) and the financial ombudsman. So, as a consumer, we are better protected now.
That’s not to say, however, that a payday loan is always the right choice of finance. Other sources of finance are generally available to the modern-day consumer, including friends and family, and other types of loan agreements. Before agreeing to a payday loan, we would always recommend checking other options available to you as payday loan companies do still charge high rates of interest. However, despite the negative stigma that seemed to have arisen a few years ago, the regulation protecting the British consumer make them look more attractive in today’s market and the popularity of the payday loan is further supported by the increase in advertisements which have made our way onto our television screens.