One in two payday loan customers say experience was positive
Despite an urgent need for payday loans to be regulated, for many customers they serve a purpose in providing short-term funds when banks are failing to deliver:
Almost half of customers (49%) who have taken out a payday loan say the experience was positive and one in three (30%) would take one out again
Half of payday loan customers (51%) believe they meet short-term borrowing needs in a way not offered by traditional lenders
But one in five payday loan customers (18%) say that the loan made their troubles worse and three in ten (29%) regret taking one out
Half of people (53%) believe that payday loan companies should be better regulated and 45% think they should be banned – but one in ten (11%) believe they are better than bankruptcy or a loan shark
Demand for accessible short-term loans remains as Brits struggle with rising bills – over one in four consumers (27%) have been forced to borrow money to cover essential living costs.
Thousands of borrowers have fallen prey to the unscrupulous practices of payday lenders, but despite this almost half (49%) of those who have taken out a payday loan claim the experience has been positive, according to new research from Uswitch.com, the independent price comparison and switching service.
With banks reluctant to lend to customers with poor credit histories, half of payday customers (51%) believe that payday loans serve a purpose for borrowers in need of quick and easy cash. Of the one in ten Brits (11%) who have turned to a payday lender to borrow money, a quarter (25%) did so as a last resort after being turned away by the big banks.
While short-term loans can quickly become a problem rather than a solution, almost half of people (49%) who have taken out a payday loan claim the experience was positive and one in three (30%) would take one out again. However, one in five payday loan customers (18%) say that the loan only served to worsen their financial worries and almost three in ten (29%) regret taking one out.
Government ministers and regulators are finally facing up to the issues surrounding the payday loans industry as pressure mounts from worried consumers. According to the research, more than half of people (53%) believe that the industry should be better regulated while 45% are calling for an outright ban. That being said, one in ten (11%) feel the stigma often associated with payday lending is less than it was five years ago and a further one in ten (11%) believe they are a better option than bankruptcy or a loan shark.
Michael Ossei, personal finance expert at Uswitch.com, says: “Make no bones about it – the way that many payday lenders are currently operating is unscrupulous, unprincipled and immoral. These modern day highwaymen have caused thousands of customers to become trapped in a downward debt spiral with no way out. This industry needs to be cleaned up – and quickly.
“But what is becoming clear is that, executed the right way, payday loans serve a purpose in helping many families bridge the gap between bill payment day and payday, 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.
“While there is a growing credit card market for ‘bad debtors’, there has been little interest from banks in developing short-term loan products and this has led to an explosion in payday lenders. 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.”
FOR MORE INFORMATION
Charlotte Nunes
Phone: 020 7148 4664
Email: charlotte.nunes@uswitch.com
Twitter: @uswitchPR
Notes to editors
Research carried out online with One Poll in July 2013 amongst a sample of 2,000 GB adults.
When those that took out a payday loan were asked 'How would you describe your experience of taking out a payday loan?', 18% said 'Negative, it made my financial worries worse'; 19% said 'Positive, it helped solve my financial problems'; 29% said 'Negative, I regret taking one out'; 30% said 'Positive, I would take one out again' and 4% said 'I don't know'.
51% of those that took out a payday loan to fund day to day living costs said they did so because 'It met my short term borrowing needs in a way not offered by mainstream lenders'; 35% said because 'It was a convenient/easy access to funds'; 36% said because 'I have a bad credit rating and was turned away from other lenders'; 25% said because 'There was minimal paperwork'; 17% because 'It enabled me to take a loan out privately'; 6% because 'Repayment amounts were presented more clearly than those offered by mainstream providers e.g. high street banks'; 5% because 'It was recommended to me by friends/family' and 25% because 'It was a last resort as I was unable to get the money elsewhere'.
When asked what they thought about pay day loans, 28% said they thought 'People are forced to use them because the banks have failed them'; 53% said 'I think they should be better regulated'; 45% said 'I think they should be banned'; 40% said 'The marketing of them is misleading'; 21% said 'They can damage your credit rating'; 12% said 'They are a better alternative to going bankrupt or turning to a loan shark'; 11% said 'There is less stigma attached to using one now compared to five years ago'; 10% said 'I think they provide a valuable service to people in need of some short term money' and 9% said 'It's easy money'.
When asked, ‘Have you ever had to go into debt to fund day to day living costs and pay your household bills?’ 27% said ‘Yes’.
11% of those that have had to take out money over the last 12 months and go into debt to fund day to day living costs said they had taken out a payday loan.
About us
It’s all about “U”!
Thank you for indulging us over the last 20 years by using a small ‘u’ and a big ‘S’ when writing about our brand in your articles.
We are delighted to let you know that you are now off the hook - it’s big U’s all the way (and small s’s) as we undertake our biggest ever rebrand - so let your autocorrect go wild!
About Uswitch
Uswitch is the UK’s top comparison website for home services switching. Launched in September 2000, we help consumers save money on their gas, electricity, broadband, mobile, TV, and financial services products and get more of what matters to them. Last year we saved consumers over £373 million on their energy bills alone.
Uswitch is part of RVU, a new business that also owns Money.co.uk and Bankrate.
If you would no longer like to receive our press releases please email prteam@uswitch.com with 'unsubscribe'.