One in two payday loan customers say experience was positive

Thousands of borrowers have fallen prey to the unscrupulous practices of payday lenders, but despite this almost half (49%) of those who have taken out a payday loan claim the experience has been positive, according to research from uSwitch.com.
 
With banks reluctant to lend to customers with poor credit histories, half of payday customers (51%) believe that payday loans serve a purpose for borrowers in need of quick and easy cash.  Of the one in ten Brits (11%) who have turned to a payday lender to borrow money, a quarter (25%) did so as a last resort after being turned away by the big banks.
 
While short-term loans can quickly become a problem rather than a solution, almost half of people (49%) who have taken out a payday loan claim the experience was positive and one in three (30%) would take one out again. However, one in five payday loan customers (18%) say that the loan only served to worsen their financial worries and almost three in ten (29%) regret taking one out.
 
Government ministers and regulators are finally facing up to the issues surrounding the payday loans industry as pressure mounts from worried consumers. According to the research, more than half of people (53%) believe that the industry should be better regulated while 45% are calling for an outright ban. That being said, one in ten (11%) feel the stigma often associated with payday lending is less than it was five years ago and a further one in ten (11%) believe they are a better option than bankruptcy or a loan shark.
 
Michael Ossei, personal finance expert at uSwitch.com, says: "Make no bones about it - the way that many payday lenders are currently operating is unscrupulous, unprincipled and immoral. These modern day highwaymen have caused thousands of customers to become trapped in a downward debt spiral with no way out. This industry needs to be cleaned up - and quickly.
 
"But what is becoming clear is that, executed the right way, payday loans serve a purpose in helping many families bridge the gap between bill payment day and payday, at a time when living costs have risen 25% in five years. The need for short-term loans is escalating and those most in need of money, often with poor credit ratings, have been turned away from the banks and left to feel they have no other option.
 
"While there is a growing credit card market for ‘bad debtors', there has been little interest from banks in developing short-term loan products and this has led to an explosion in payday lenders. Even if the payday loan companies clean up their act, there is a bigger question that needs to be asked about the role banks should take if the need for short-term borrowing continues to grow, as we believe it will."