Dramatic rise in payday loan problems – charity urges anyone struggling with them to seek help

4 December, 2012

StepChange Debt Charity has seen a dramatic rise in people seeking debt help with payday loans.

Over twenty-five thousand (25,476) people have sought the charity’s help with payday loans in the first three quarters of 2012. This far exceeds 17,414 for the whole of 2011 and continues an upward trend from 7,841 in 2010 and 6,491 in 2009. The charity believes that over thirty thousand people will have sought its help for payday loans by the end of the year.

StepChange Debt Charity says that payday loan debt can spiral very quickly if problems with repaying are not dealt with. It is urging anyone who is unable to repay their payday loans, who keeps rolling payday loans over, who has multiple payday loans or who is taking out one payday loan to repay another to seek free debt advice from a charity such as itself. 

It points to new qualitative research that it commissioned from the Personal Finance Research Centre at the University of Bristol which highlights the benefits of seeking debt advice from a charity. The clients who were interviewed said that, as well as putting in place a mechanism to manage their consumer credit debts, debt advice often changed how they felt about money and how they managed their money. This was because the debt advice process provided an opportunity for them to talk candidly about their finances in a way that they had rarely or never done. 

There were three main changes that people talked about in the interviews:

1.Learning the value of money

As a result of their experiences, people felt they enjoyed a better relationship with money than they had in the past. They understood the value of money more concretely and felt they had more control over their money (rather than vice versa). One person described how a debt management plan “rehabilitates you with money”. Another talked about learning to be “a steward of my money”.

2.Taking steps towards better money management

Learning the value of money translated into behaviour changes such as a more cautious approach to spending, making sure that priority bills were top of the list, and budgeting. Several people were trying to put money aside for emergencies or a holiday, when in the past they would have simply relied on credit to see them through. 

3.Feeling more confident

The debt advice process helped people feel more confident about managing their money, but also about dealing with their creditors. In some cases, this spilled over into other areas of people’s lives as well. 

Commenting on the increase, Delroy Corinaldi, external affairs director of StepChange Debt Charity, said: “The dramatic rise in problem payday loan debt is alarming as this type of debt is expensive and can spiral out of control very easily.

“It is therefore crucial that anyone struggling to repay what they owe at the end of the month doesn’t keep rolling over their loan and racking up very high charges, but seeks advice from a debt charity instead.

“Otherwise, they could very quickly find themselves with a serious debt problem."