Short-term, high interest loans are putting people at risk of creating insurmountable levels of personal debt, politicians and financial experts have warned.
In the next six months up to 3.5 million financially vulnerable Britons are expected to take out the unsecured loans, market-leading financial experts R3 have warned, potentially leading to crippling amounts of personal debt.
After conducting interviews with 2,000 members of the public, the group found that 60% were worried about their personal debt, with a further 45% admitted to finding it hard to make ends meet each month before their next payday. That figure rose to 62% among 24-44 year olds.
R3 said their findings showed the highest level of money worries they had ever recorded.
But the chief executive of the Consumer Finance Association disagreed with the figures. John Lamidey said that R3 had "extrapolated" their statistics from a very small sample.
"Our experience is that 94% of our customers are totally happy with the product that they're getting," he said.
The risk behind the loans lies in the incredibly high interest rates that can leave consumers in a worse position than before.
With some companies setting interest rates of up to and above 1,000%, late repayment can result in the user owing vast amounts of money more than they intended, or can afford.
Labour MP Stella Creasy believes that the country is being "bled dry" by short-term loan companies. Creasy urged the government to step in and prevent the country's financial status worsening.
"Whilst most other countries have caps on the costs of credit, this Government stubbornly seeks to avoid such measures leaving consumers who are already struggling financially without any protection from these profit hungry predators," Creasy said.
Creasy even highlights that a third of those who took out the loans had to take out multiple other loans in order to pay off others. "By ‘rolling over’ loans into subsequent months borrowers are compounding these already extortionate interest charges and so falling deeper into debt," the MP wrote.