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The number of so-called payday loans taken out by UK consumers has risen by around 130% in the past ten months, according to price comparison website moneysupermarket.com.

 Payday loans are short-term loans taken out by consumers to cover cash shortfalls, usually in the days before they are due to receive their monthly salary. However, they come at a price, with a typical £100 loan costing around £25, even if it is paid back at the earliest time possible.  

The annual percentage rate (APR) of these loans is even more crippling, with one well-known lender admitting that their APR works out at around 1355%, a figure which is reasonably representative of the APRs offered by their UK competitors. Such punitive interest rates compare unfavourably with those offered by credit cards, secured loans, homeowner loans and most overdraft facilities.  

Chris Tapp, of debt charity Credit Action, commented, “Over the past year, payday loans have become an issue in the UK, and the growth in people who have problems who have such a loan has been notable in the last six months.”