Within the last year, the UK has seen a sharp increase in the amount of high-cost short-term credit (HCSTC) loans, such as payday loans, with consumers taking out £600,000 more of such loans in comparison to the previous year. Additionally, the overall increase in the amount of such HCSTC loans taken out by consumers, has been further met with an increase in the value of these loans, consumers having to pay back £1.3 billion in comparison to the previous year of £1.1 billion.
The highest percentile of borrowers to these types of loans were within the age category of 45 to 54 years old. However, a close second to this group was those of 25 to 34 years of age, attributing to 37% of the annual payday loans.
The most likely group of people to take out such HCSTC loans throughout the UK were those living in both the North-East and North-West of the country. With every 118 out of 1000 adults living in the North-East having loans, as well as every 125 out of 1000 adults from the North-West also borrowing such loans.
However, these statistics were closely followed by Londoners, with every 114 of every 1000 adults living in the capital city having loans. In addition to this, those living in London borrowed a higher average of £284 each compared to the North East (£235) and North West (£234).
The statistics were also published of the different trends in the living situations of those who took out such loans. 30% of HCSTC loan borrower being tenants, 26% living with parents, 13% being homeowners and 7% living in accommodation provided by the council.
A disturbing result published from studies into the annual borrowing of such high-cost short-term credit loans showed that 60% of such loans (specifically payday loans) were not confident that they would be able to pay back their loans.
Results from these studies into this last year’s HCSTC loans therefore not only show a worrying increase in both withdrawal and repayment of such loans, but also a foreshadowing to its contribution to the UK’s debt problem through over half of all payday loan borrowers claiming to be doubtful that they can pay the money back.
There are approximately 40 payday lenders in the UK, which is down from around 200 in 2013 when the industry was its in heyday. Following the introduction of strict regulation from the FCA, the industry has reduced in size significantly with many large names leaving the industry including Wonga and The Money Shop.
Although these rises in both the taking out of, and interest rates to, these HCSTC loans is a definite contributor to the problems causing the UK’s debt, AJ Bell’s personal finance analyst Laura Suter has claimed that these loans are just one of the many issues that have caused this. Suter suggests other contributors to the UK’s current debt problem also stem from a further £45 billion sat on credit cards from the end of last November, in addition to a further £6 billion held in overdrafts.