• Brits took out £2.1bn worth of payday and short-term loans in 12 months
• People in the North-West and North-East are most likely to have a loan
• Londoners are borrowing the most
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the FCA’s short-term loan figures:
“As a nation we took out more than 5.4 million short-term and payday loans worth £1.3bn in the 12 months to the end of June last year. These loans will leave Brits owing £2.1bn thanks to high interest rates providers charge, even though the cost of borrowing has reduced in the past four years since the regulator introduced a price cap.
“People living in the North-West and North-East are most likely to take out loans, with 125 loans per 1,000 adults and 118 loans per 1,000 adults, respectively. This is closely followed by London, which has 114 loans for every 1,000 adults living in the area. However, Londoners are borrowing more than any other area, with average loans of £284 each, compared to £235 in the North East and £234 in the North West.
“Young people are increasingly turning to high-cost, short-term debt, with 55% of all payday loans being taken out by those aged 18 to 34, while this age group accounts for 44% of all short-term loans. In comparison, less than 1% of payday loans are taken out by those aged 65 and above.
“The number of providers in the short-term and payday loan market has fallen in recent years, from 106 firms in 2016 to 88 today. The most high-profile exit from the market was Wonga last year, which at one point charged interest rates upwards of 5,000%, while the regulator’s cap on payday loan interest four years ago has been blamed for others leaving the market.
“These short-term loan figures are just one part of the UK’s debt problem – we also owed almost £45bn on credit cards at the end of November last year, and another £6bn in overdrafts. What’s more, half of people say that keeping up with their bills and debt is a burden on them, which leaps to 89% of people who have payday loans.”