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1 million people using payday loans to cover household bills

Santander claims one million people in the UK are using payday loans to cover the cost of household bills in a typical month

The figures are based on research commissioned by Santander and conducted by Opinium Research in June this year with 2,011 UK adults.

Respondents were asked to estimate how much they take from a number of sources each month to pay for bills.

The average across all sources for all who use a form of debt is £259.07.

Out of the 2,011 respondents 557 said they use one of a number of sources to cover monthly bills which equates to 28% of the sample. And out of these 45 said they specifically used a payday loan to cover their monthly bills which equates to 2.2 per cent of the sample size.

Based on the UK’s adult population of 49.9 million, Santander says this equates to 1.2 million people.

These respondents estimated that they take an average of £152.78 from payday loans or £1,833 per year. £1,833 x 1.2 million gives us an annual total of £2.2bn.

Santander UK’s banking director Reza Attar-Zadeh says: “In an ideal world, household bills should be one of the first costs to be covered when payday arrives, but as the research highlights, this isn’t always possible.

“The cost of living is going up, driven in part by the rising cost of household bills, and as a result, millions of people are regularly borrowing money to make ends meet which cannot be sustained in the long-run.

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  • Neil Allan 16th September 2012 at 1:37 pm

    There really isnt a problem with payday loans as such. its not a new idea but the way it is marketed is where the problems are coming in.
    For the average Joe and Mrs Joe who earn a decenty income and have a few savings taking out a loan like this would not really be a problem if they needed it but these loans are primarily aimed at low income earners who most likely have tried and have been refused elsewhere for what ever reason and the fact that it is a very minor credit check if even any credit check gives them easy access to money they probably cannot afford to borrow anf then the problem escalates. if this type of loan was restricted to good credit earners with good credit history then it is unlikely that it would ever sell in the first place and quite likely it would never have the negative press about it being unaffordable.
    The rates on these products and the costs on these products are very clearly marked out but what is not advertised so much is the fact that these loans can be handed out with the minimum of status checking and thats what makes it sell. The applicant may have the best intentions but reality often gets the better of them and crisis starts.

    Regulation is needed to control the way they are marketed and issued. You are niot going to change the applicants but you can take more care with who may or may not get this type of lending.

  • PARACHA 13th September 2012 at 12:24 pm

    Payday lending despite whatever faults does fulfill a certain niche… n yes the rates are astromnomical and alot of people do tend to end up in a vicious cycle on a monthly basis to cover expenses as well as interest on such loans…

    but then major banks do charge astronomical rates on credit cards so its not anything they should be complaining over… taking the higher ground …

    i do feel since there is a niche for such lenders, perhaps the best option is to monitor and regulate more aggressively… only to ensure consumers are protected as much as possible…

    you never know but perhps soon major banks would join this lucrative market as well… ka-ching!!

  • Gary Anderson 12th September 2012 at 4:30 pm

    Payday loans should be a last resort due to the costs involved but as Santanders research shows people are struggling with finances and the cost of living, some clients have no choice.

    One of the biggest issues for mortgage lenders is that they view customers who have taken out payday loans as struggling with their finances (fairly apparent) and won’t lend to the customer based on this. The payday loan firms don’t mention this in their small print which doesn’t help!

  • Russell Watson 12th September 2012 at 3:27 pm

    Just because the charges are crystal clear doesn’t make it right. Short term or long term the rates are astronomical. More reasonable rates can be found through the credit union…..PPI companies are being dealt with, for the grace of god let’s hope the next ones are the door step lenders like Wonga reminisent of provident or welcome finance.

  • Aurangzeb Paracha 12th September 2012 at 3:13 pm


    These respondents estimated that they take an average of £152.78 from payday loans or £1,833 per year. £1,833 x 1.2 million gives us an annual total of £2m.”

    that would be 2.2bill approx

  • chris jackson 12th September 2012 at 1:45 pm

    I totally disagree with the comments above. Whilst the apr on payday loans is high it is partly because they are paid back over a very short term often less than a month which in turn inflates the APR. Companies like Wonga are crystal clear how much interest you pay back and when by, upfront so it is crystal clear before someones apply what they have to pay.

    I agree in the article these should not be used to pay household bills each month but banks are taking the moral highground against these because they didnt think of it first. Nobody seems to mention some of interest charges banks charge on their credit cards with a lot of people also use to pay their food fuel etc.. each month and dont pay off, but then again banks wont criticise this because they sell them !! I would concentrate more on regulating the companies who force clients into claiming on ppi etc… as companies are paying FSA complaint fees when in some instances they have done nothing wrong

  • chris jackson 12th September 2012 at 1:44 pm

    I totally disagree with the comments above. Whilst the apr on payday loans is high it is partly because they are paid back over a very short term often less than a month which in turn inflates the APR. Companies like Wonga are crystal clear how much interest you pay back and when by, upfront so it is crystal clear before someones apply what they have to pay.

    I agree in the article these should not be used to pay household bills each month but banks are taking the moral highground against these because they didnt think of it first. Nobody seems to mention some of interest charges banks charge on their credit cards with a lot of people also use to pay their food fuel etc.. each month and dont pay off, but then again banks wont criticise this because they sell them !! I would concentrate more on regulating the companies who force clients into claiming on ppi etc… as companies are paying FSA complaint fees when in some instances they have done nothing wrong

  • Russell Watson 12th September 2012 at 1:19 pm

    These Payday loan companies are the leeches of society praying on the people that have no choice but use them as there is no credit available. These companies should have been put out of business a long time ago or at least regulated so they can only charge a reasonable APR. Wonga and these other companies have no ethics whatsoever.