Rise in cost of living brings payday loans to fore

With the prices of the essentials of life such as basic foods and petrol continuing to spiral out of control, a record number of Brits are turning to payday loans to help tide them over financially.

Research from price comparison site moneysupermarket.com shows the take-up of short-term payday loans has seen a massive upswing, increasing by over 55 per cent since September.

Tim Moss, head of loans at moneysupermarket.com, said: "The rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day. As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are increasingly used to help those on a tight budget.

"Payday loans can be useful as a short-term credit vehicle. They are a bit like taxis -convenient for short journeys, but if you are going a long way, there are much cheaper ways to travel.

"They should only be taken out when it's absolutely necessary and you are sure you can pay it back quickly. Anyone looking for longer term credit or unable to pay off the debt immediately, should steer clear of them. It would be wiser to borrow the cash from family or friends or arrange an authorised overdraft with your bank."

Tim Moss added: "Payday loans have a maximum term of 30 days, with a typical interest rate being 25 per cent per month. Borrowing £80 for a month and repaying £100 is a better deal than going into your unauthorised overdraft.

"Of course, the best solution is to sit down and analyse everything you are spending your money on: Are there any potential savings you can make and is all of your spending essential? Then get in the habit of making regular contributions to a high-interest current account, so there is always money available should you need it."