THERE has been a huge increase in the number of payday and short-term loans taken out by borrowers.
A whopping 5.4 million high-cost loans were taken out in the year to June 2018, the latest data from the Financial Conduct Authority (FCA) shows.
This compares to 4.6 million withdrawals during the same period the year before.
The amount of cash borrowed also fell from just over £1 billion between July 2016 and June 2017 to just under £1.3 billion between July 2017 and June 2018.
But while the average loan value in the year to June 2018 was £250, the average amount ultimately repaid by borrowers was £413, or 1.65 times the amount borrowed.
Average loan values are highest in Greater London at £284 per loan.
Are you eligible for payday loan repayment?
MILLIONS of payday loan customers may be eligible for repayments. Here’s everything you need to know.
Customers who have paid off their payday loan debt can still claim
Even if you have paid off your debts, you will still be able to get a refund if you had trouble repaying the money at the time.
If you’re still paying off your payday loan debt
You can complain if you’ve had trouble making refunds. If your complaint is successful, this could reduce the amount you owe.
You can always pretend that the business no longer exists
Big companies like Wonga and QuidQuick no longer work, but that doesn’t mean you can’t get some money back. Customers can still file complaints against companies that are no longer operating, although they are less likely to receive a refund as they will have to go directly to the administration companies.
Although, if their complaint is successful and they still owe debt, it could mean you have to repay less, so it’s still worth complaining about.
Affordability is different from bad selling
Many companies claim to help payday loan customers who have been mis-sold. Affordability has the potential to be a much bigger issue, as tougher affordability controls were introduced in 2015 by the city’s watchdog, the Financial Conduct Authority. This meant that many loans were offered to customers who could not afford to repay them.
In 2014, the FCA introduced rules prohibiting payday lenders from charging borrowers more fees and interest than the amount borrowed.
The financial regulator also announced a cap on lease-to-own products following the Sun’s Stop The Credit Rip Off campaign.
When it comes to who takes out these expensive loans, the FCA found that the largest group (37%) of people who take out payday loans are those between the ages of 25 and 34.
And most (37%) rent or live with their parents (26%).
On a regional basis, the North West has the highest number of loans taken out at 125 per 1,000 people, while Northern Ireland has the lowest at 74 per 1,000 people.
But while the FCA says lending volumes have increased since 2016, it adds that they remain “well below” the levels seen in 2013.
Half of people say their bills and debt are a burden
Sue Anderson, spokesperson for debt charity StepChange, said: ‘FCA figures released today show payday lending is on the rise again, and financially strained young people are still most likely to resort to high cost credit – which is what we see among our customers.
“In 2017, 15.7% of StepChange clients had high-cost payday or short-term credit debt; this figure rose to 18.3% for the first half of 2018 alone.
“Too often, this type of credit is where people turn for help when they are already struggling to meet their commitments – we urge people to seek advice before turning to high cost credit as a way of trying to cope financially.”
Laura Suter, personal finance analyst at investment platform AJ Bell, agrees that it’s people who turn to payday loans who are already struggling with debt.
She said: “As a nation, we took out over 5.4million short-term and payday loans worth £1.3billion in the 12 months to the end of June. ‘last year.
“These loans will leave Britons left with £2.1billion thanks to high interest rates charged by providers, even though the cost of borrowing has come down in the past four years since the regulator introduced a cap on price.
“Furthermore, half of people say coping with their bills and debts is a burden for them, which jumps to 89% of people with payday loans. »
How to reduce the cost of your debt
If you are very in debt, it can be very worrying. Here are some tips from Citizens Advice on how you can take action.
Regularly check your bank balance – knowing your spending habits is the first step to managing your money
Calculate your budget – noting your income and removing your essential bills such as food and transportation
If you have money left over, plan ahead what else you will spend or save. If not, look for ways to reduce your costs
Reimburse more than the minimum – If you have credit card debt, try to pay more than the minimum amount on your credit card each month to reduce your bill faster
Pay your most expensive credit card sooner – If you have more than one credit card and cannot pay them off in full each month, choose the most expensive card (the one with the highest interest rate)
Prioritize your debts – If you have several debts and you cannot afford to pay them all, it is important to prioritize them
Your rent, mortgage, council tax and energy bills must be paid first as the consequences can be more serious if you do not pay
Take advice – If you are struggling to pay your debts month after month, it is important that you receive advice as soon as possible, before they pile up even more
Groups like Citizens Advice and Money Advice Trust can help you prioritize and negotiate with your creditors to offer you more affordable repayment plans.
The news comes as just today a payday loan broker charging up to 1,575% interest said he wanted people to go to JAIL for getting into debt.
We also recently revealed how payday loan companies are targeting hardened Brits in Facebook groups.
But there’s a new, free tool to help millions of people seek repayments from payday lenders for unaffordable loans.
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