SETTLING payday loans has taken priority over meeting bills for “essentials” for many Yorkshire households, it is claimed.
Some 13% of people polled by insolvency trade body R3 said they had prioritised paying back such loans above essentials such as food, clothes, gas and electricity. Almost one in 10 said they were likely to take out a payday loan in the next six months.
Nationally, more than 5m people said they were likely to seek this type of short-term high interest loan body – compared to 3.5m people a year ago.
Chris Wood, Yorkshire R3 committee member and partner at Clough Corporate Solutions in Cleckheaton, said: “It is staggering that in one year the number of people considering taking out a payday loan has increased by 50%.
He said: “If used in the right way – to fill a genuine one-off gap in finances – a payday loan does have a place. However, they are increasingly being taken on as a debt solution.
“Last year one in three couldn’t pay off the first payday loan so had to take out another. Now 7% of those in the region have prioritised paying back this debt over buying food in the past six months.
The research also shows that 32% of people in Yorkshire are worried about levels of debt – higher than the national average of 27%. The largest number of respondents in the region were most concerned about credit card debt (43%), followed by overdrafts (26%) and mortgage (23%).
Mr Wood said: “Debt has been normalised, attributable in part to clever marketing campaigns of the big payday lenders. These loan companies are capitalising on a generational shift in attitudes towards saving and debt. Currently, 26% of adults in the region do not have any savings.
“The problem with payday loans is you can end up paying much more later on and more than a quarter of 18-24 year olds are likely to seek one out.
“Saving and waiting isn’t common place. Many of these people tend not to have the credit rating to call at more traditional establishments and have resorted to payday loans.”
Mr Wood said: “Current usage is a million miles away from the supposed purpose of payday loans, which providers claim ‘smooth over financial peaks and troughs’. Instead, expensive loans are forcing some debtors into making difficult choices.
“If money has to be spent paying back these debts ahead of food, clothing, gas or electricity then these loans are only exacerbating a difficult situation. The problems stand a greater chance of being resolved by seeking professional advice”.