Payday loan popularity dips – but demand amongst young adults ‘worryingly high’
Younger age groups most concerned about impact of payday loans on their finances
The popularity of payday loans has dipped, with just 7% of UK adults planning to take out a payday loan in the next six months, down from 11% in October 2012, according to a survey of over 2,000 people by R3, the insolvency trade body.
However, R3 warns that demand for payday loans is highest amongst young adults, with 17% of 18-34 year olds likely to take out a payday loan in the next six months, compared to just 3% of those aged 35 and over.
For 18-24 year olds with debt worries, almost one-in-five (19%) are concerned about their level of payday loan debt, up from just 8% in February and 14% in October 2012.
R3 president Liz Bingham says: “Negative publicity about the risks of payday loans may be starting to affect their popularity. However, payday and other short-term loans remain a significant financial crutch for younger age groups.”
“It is very concerning that the age group with the biggest demand for payday loans is also the group where there is the biggest concern about the impact of those loans amongst those that have already taken them out. In this context, the 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 UK adults surveyed by R3 that had taken out a payday loan, 51 said they had prioritised repaying their loan over food purchases in the last six months.
Liz Bingham says: “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 they are certainly not appropriate for someone already in financial difficulty.”
“For the majority of people with a payday loan, taking one was the ‘choice’ of last resort. 53 of the 94 people with payday loans in the latest R3 research said they took one because they couldn’t get credit 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
- The highest demand for payday loans is in London (15% of respondents are likely to take out a payday loan in the next six months), followed by the North West (10%) and North East (9%)
- Of the almost 20 million British adults that say they struggle to make it to payday, 7% say a payday loan is responsible.
For further information please contact:
Nick Cosgrove, R3 Communications Manager
t: 020 7566 4215 m: 07917 422 485 e: firstname.lastname@example.org
Notes to editors:
- Methodology: ComRes interviewed 2,060 GB adults online between 31st May and 2nd June 2013. Data were weighted to be demographically representative of all British adults aged 18+. A lower sample size (94) made up the group of those who have taken a payday loan in the past six months. ComRes also interviewed 2,007 adults online between 1st and 3rd February 2013, and 2,051 British adults online from 28thand 30thSeptember 2012. Data were weighted to be demographically representative of all British adults aged 18+.ComRes is a member of the British Polling Council and abides by its rules (www.britishpollingcouncil.org).
- Full data tables are available on the ComRes website, www.comres.co.uk
- R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners.
- R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
- R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals. Website www.r3.org.uk