Trade body warns against Christmas payday loans

The President of insolvency industry practitioners’ body R3 has warned of people getting into further debt in 2012 as a result of paying off Christmas.

Frances Coulson warned of the temptation of payday loans for those struggling to afford Christmas, after the organisation conducted research which suggested that a third of consumers will take a month to pay off debt caused by their festive spending.

This does represent a fall when compared to last year, which saw half of consumers take a month to pay off Christmas debt.

Ms Coulson said: “There are still huge numbers of people who will struggle to afford Christmas and may well look to short-term loans and credit cards.

“They should be wary of the high interest rates that often accompany these products, as this will leave them lumbered with Christmas debt long into next year,” reported Cleardebt.

R3’s study found that 13 per cent of those questioned felt they would not be able to afford to pay their bills at the end of the year, although this percentage rose to 16 per cent in the capital.

Stuart Carmichael of the Debt Support Trust also reportedly advised against taking out payday loans because recent research revealed the charges are nearly as expensive as unauthorised overdraft costs.

He also highlighted his concern that these types of loans can be taken out on a whim because the process by which they are agreed can be so rapid that potential consumers may not have a chance to fully think through the implications of taking out such a loan.

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