The popularity of payday loans in the North West has dipped, according to a survey by the insolvency trade body R3.
It found that 10% of adults in the North West were planning to take out a payday loan in the next six months, down from 12% in October 2012. However the North West remained one of the areas with highest demand, second only to London where 15% of adults said they were likely to take out a payday loan in the next six months.
The survey questioned over 2,000 people throughout the UK including 244 from the North West. It found that demand for payday loans was highest amongst those aged 18 to 34. This younger age group was also the most concerned about the impact of payday loans on their finances.
Jeremy Oddie, North West chair of R3 and head of recoveries at accountants Mitchell Charlesworth, says: “Negative publicity about the risks of payday loans may be starting to affect their popularity. However, demand for payday loans among young adults is worryingly high.
“Rent and study costs, along with a lacklustre graduate jobs market are the catalysts that force young adults to turn to short-term credit to fund day-to-day expenditure.”
Of the 94 adults in the survey who had taken out a payday loan, 53 said they done so because they had been unable to get credit elsewhere, while 51 said they had prioritised repaying their loan over food purchases in the last six months.
Jeremy Oddie adds: “In reality, payday loans are not the ‘lifestyle’ choice that they are sometimes promoted to be. Prioritising payday loan repayments over basic purchases suggests those with these loans already have serious financial problems. Payday loans might be appropriate in some circumstances, but certainly not for someone already in financial difficulty.
“Our survey shows that for the majority of people who had taken out a payday loan, it was the ‘choice’ of last resort as they were unable to borrow from elsewhere. A payday loan in this situation could just make debt problems worse.”
The research also found that:
• 43 of the 94 people surveyed with a payday loan said that the loan had made their financial situation worse
• 17 of the 94 surveyed with a payday loan have had to use their overdraft to make a payday loan repayment
• Of the almost 20 million British adults that say they struggle to make it to payday, 7% say a payday loan is responsible.