Research has shown three and-a-half million adults consider taking out a payday loan over the next six months as many struggle to make ends meet.
Pressure of buying Christmas gifts and attending parties adds more expense on to people’s monthly outgoings with some not being able to make their wage stretch far enough.
Research carried out by R3 who are the Association of Business Recovery Professionals showed that 45% of people struggle to make it to pay day.
The number of people who run out of money before the end of the month has also increased by 7% compared to last year.
Payday companies are now thought to be worth £2bn a year with some charging interest of more than 4,000%.
They are advertised more recently using magazines, TV programmes and the internet to advertise their short term loans.
With Christmas fast approaching payday loan companies are expected to see a surge as people struggle with their finances to buy the all important essentials.
The results of the research also showed that 60% of people who took out loans regretted the decision, 48% believe their loan has put them into financial difficulty and only 13% believe the loan has a positive impact on their finances.
Frances Coulson, R3 President commented: “Payday loans are not the best way to resolve debt struggles. We know that many who take them out find them to be a negative experience, often escalating financial troubles.
“Having a financial buffer is crucial to weathering periods of difficulty. If struggling to payday becomes a regular occurrence, seeking financial advice should be a priority over short term high interest credit.”
Added debt issues aren’t helping with individuals worrying about their personal debt levels and the number of people with no savings has also increased.
The population are saving less than they have at the moment because of prices of daily living increasing constantly.
The Government are working hard to stop the loan companies charging so much interest to try and reduce the debt that is growing in the UK.
Ways of tackling the companies will be looked at by the Department for Work and Pensions to see if alternatives can be drafted in such as credit unions.
The UK is obviously feeling the pinch this Christmas but taking short term loans out for the big day doesn’t necessarily mean it will better them financially.
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By Amanda Bainbridge