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Why Payday Loans Are Increasing

Payday loans are becoming more common. Find out the reason behind the increase in these types of loans.

Author: Louise Goldstein

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Throughout the UK the popularity of payday loans is increasing. The number of payday loans has increased fourfold in the last four years from 1.2 million loans to 4.1 million in 2010. Payday loans are often taken out multiple times by borrowers with an average of 3.5 loans per year, with average amount borrowed £294.

What are the reasons behind this rise in these kinds of loans?
The increase in popularity of quick cash loans are down to a number of factors. Here are the top reasons:

Bank fines and late payment fees are applied by various institutions including banks, credit card companies, phone companies and utility services which can often make a payday loan a cheaper option than paying a fine. Sometimes the fee applied for an un-agreed over draft on your bank account will amount to less than the amount you pay to borrow a payday loan.

The downturned economy which the UK has experienced in recent years has impacted the amount of credit available to consumers. The ability to gain quick instant loans despite sometimes having a bad credit rating makes payday loans the only option to those in need of cash before next payday.

Another catalyst for growth in the payday loans UK market is the entrance of US firms. Often companies which perform well in the US make their way across the pond and replicate proven methods that work. The reason the UK is so attractive to US lenders is the size of the UK market is comparable to be as big as the 3rd or 4th largest US states.

The continued growth in Internet usage helps to fuel the online payday loans market. Many payday loan companies in the UK operate online as all application forms and paperwork can be done over the Internet making it very quick and convenient often allowing funds to be within the consumer’s bank account in hours. Online companies have cheaper running costs as they don’t have to layout for larger more expensive premises costs as customers do not visit the business in person.

Sometimes everything happens at the same time, a few birthdays come all at once, your car breaks down and your tooth gets chipped. Payday loans have helped many employed people to make payments when they need to and avoid fines. The rising cost of living in the UK can mean that some months your pay check just doesn’t cover your outgoings.

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