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.