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Loan charges: More Brits are turning to payday loans

A greater number of Brits could be incurring high loan charges as banks have tightened their lending criteria.

As a result, there has been a 58 per cent increase in the number of people applying for payday loans since the May Day bank holiday, recent statistics from price comparison site revealed.

This form of borrowing comes with the risk of incurring loan charges as the providers can charge as much as 2,000 per cent interest, which may push consumers further into debt.

David Rodger, managing director at the Debt Advice Foundation, stated that consumers are seeing payday loans as an alternative to obtaining one from a bank, as they have become more reluctant to lend money.

He said: "Any type of loan carries risk - for example the risk of default if you are unable to meet your monthly repayments. 

"The real risk associated with payday loans, which often have high APRs (annual percentage rate), is getting into a cycle of borrowing that is difficult to break out of."

Amir Hussain

Amir specialises in personal loans, consumer debt and debt management.

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