One in two payday loan customers have positive experience

New research also reveals that 30% would take one out again

Despite the positive data, 29% of payday loan customers regret taking one out

Despite the positive data, 29% of payday loan customers regret taking one out

Almost half of payday loan customers claim the experience has been positive, according to new research by uSwitch.

In recent months the industry has been on the receiving end of a media and government backlash, including calls for tighter regulation and advertising bans.

Despite this, a uSwitch survey found that 30% of payday loan customers would take one out again, while 19% said it helped solve their financial problems.

However, not all of the survey’s findings were positive.

At the start of August, Citizens Advice found that three in four complaints against the payday loans industry were worthy of being referred to the Financial Ombudsman, and uSwitch’s study reveals that 29% of customers regret taking out a payday loan in the first place.

Moreover, 18% said a payday loan made their financial worries worse.

Serving a purpose

With banks reluctant to lend to customers with poor credit histories, half of payday customers believe the loans serve a purpose for borrowers in need of quick and easy cash.

Of the one in ten Brits who have turned to a payday lender to borrow money, 25% did so as a last resort after being turned away by the big banks.

Michael Ossei, personal finance expert at uSwitch, believes that the industry “needs to be cleaned up” but that payday loans serve a purpose at a time when living costs have risen 25% in five years.

“The need for short-term loans is escalating and those most in need of money, often with poor credit ratings, have been turned away from the banks and left to feel they have no other option,” Mr Ossei said.

Banks not meeting demand

Government ministers and regulators are under pressure to regulate the payday loan industry as worried consumers voice their concerns.

According to the research, 53% believe that the industry should be better regulated while 45% are calling for an outright ban.

Further to this, 40% said the marketing of payday loans is misleading and 21% said they can damage your credit rating.

Mr Ossei believes there is growing need for a better regulated alternative but banks have shown “little interest” in developing short-term loan products to rival the industry.

“Even if the payday loan companies clean up their act, there is a bigger question that needs to be asked about the role banks should take if the need for short-term borrowing continues to grow, as we believe it will,” he concluded.

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5 comments

  1. Tigger on August 12, 2013 at 8:20 pm

    One in two is 50%, yet the article says 30% which is less than one in three. Whilst this is still surprising the headline should match the statistics

  2. John Davies on August 13, 2013 at 5:47 am

    I was forced to take payday loans after the HMRC unexpectedly hit me with a sixteen thousand tax shortfall. They garnished my salary and despite my best efforts was left with far less than what HMRC was taking from me. I had no option but to use Wonga twelve times just to be able to get by. Because I struggled with my bills, my credit record meant that the banks would not even look at my loan applications. I was living on the precipice. Wonga was my saviour and if I am any financial difficult, I do not hesitate a moment to get in touch with them. It is the government that’s getting people in these situations in the first place. Remember the comments of the HMRC two years ago,”…some people will be hit with shortfalls even if we are wrong, they still have to pay”. We are paying.

  3. Philip McNeill on August 13, 2013 at 10:18 am

    From my understanding these companies will take people with a poor credit rating and without the proper checks to show ability to pay. Then when the customer gets into difficulty repaying it is reported to credit reference agencies which the payday loan company didn’t use at the application. Thereby, the customer gets a lower credit rating and unable further to get loans. It is a downward spiral for a lot of people.

  4. Jafar Hassan on August 13, 2013 at 2:25 pm

    Hey Tigger, 30% only relates to those who would take one out again, while 19% also found it positive because it helped solve some of their financial problems. That’s 49% / one in two. Hope that clears things up for you ;)

  5. Andy Cash on August 14, 2013 at 11:40 am

    Any reputable company that offers credit will report your repayment history, good or bad, to credit agencies. This helps lenders make informed decisions and can also help build positive credit history.
    Most payday lenders will carry out appropriate identity and credit checks before offering a loan, and will need to be assured through the application information provided, that the customer can afford to pay a loan back.