Payday loans are thought to be benefitting from credit crunch crisis

Some loan firms are thought to be booming due to the lack of money families currently have

13:56 17 November 2012

Loan groups, such as those offering Payday loans, are rumoured to owe any successes they have to the credit crunch. Payday loans are supposedly being targeted by individuals as well as families who are struggling to keep afloat financially.

 

The method behind payday loans is that they offer quick and easy money to borrowers, which is why a large number of people are seeking out the lenders.

 

A problem many Britons are encountering seems to be that once certain types of loans have been granted, they can result in a circle of debt.

 

Recent research carried out by Which? states that around 38per cent of payday loan customers use the loan in order to afford bare essentials, such as food and fuel.

 

It is understood that cash can be borrowed, but that it has an interest rate that can mount as high as 4,214per cent annually, according to the study. It found that apparently 20per cent of payday loan customers borrow this cash.

 

The reasons for people borrowing loans can relate to many things, however 25per cent of those involved in the Which study were found to be using the money to afford debt repayments. Reportedly, 50per cent said they were unable to pay the loan off, with roughly the same amount of people having missed a payment and incurred a subsequent charge.

 

Some experts have said that missed payments can also result in a new agreement being created which adds to people’s debt problems.

 

According to some reports, other payday lenders have said that their customers are content with the service they receive.