National Debtline Warns on 'Payday Loans'

Many hard-up Britons are using 'payday loans' to tide themselves over, National Debtline has claimed.

The debt helpline said that the loans trend was "symptomatic" of an underlying personal finance problem in the UK, which sees people spending over their means and using high-interest unsecured lending to make up the shortfall. In time, this can lead to consumers becoming trapped in a debt cycle.

Pay day loans are short-term personal loans which are specifically designed for customers who run out of money prior to receiving their monthly or weekly salary. The products tend to be high-interest, and therefore need to be paid off as soon as possible.

Beccy Boden Wilks, spokesperson for National Debtline, advised: "Fundamentally, the more important issue is why do you need a payday loan? If you've run out of money [ahead of your next paycheque], so you feel that you need to use these sorts of services, then there's obviously a problem. Your outgoings are more than your income.

"So if somebody feels the need to use a payday loan on a regular basis, it's probably symptomatic of a serious underlying debt problem. So, you need to look at budgeting, or [ask] are your credit commitments too high, or have you overcommitted yourself with your mortgage?"

Ms Boden Wilks went on to recommend that people who over-use payday loans should seek professional debt advice as soon as possible.

Recent figures from MoneyExpert.com suggest that repayment rates of unsecured personal loans have increased over the past year, due in part to the continuing credit crunch.