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One million use payday loan to pay rent

Shelter survey shows families struggling with rent. Picture: Getty

Shelter survey shows families struggling with rent. Picture: Getty

  • by VICKY SHAW
 

Nearly a million people are estimated to have taken out a payday loan in the last year to help cover their rent or mortgage costs, according to research from Shelter.

The housing charity said one in 50 (2 per cent) of those it surveyed said they had done this, which would equate to nearly 885,000 adults if the findings were projected across Britain.

Shelter said it dealt with just under 9,000 calls to its helpline from people struggling to pay their rent or mortgage last year, up a third (32 per cent) on the total for 2012.

Its findings on the extent to which people are using loans to plug gaps in their finances came from a survey in November of almost 3,700 people who pay rent or a mortgage.

Nearly a fifth (19 per cent) said that they had borrowed in some way to cover their rent or a mortgage payment in the past 12 months, including dipping into an unauthorised overdraft, taking out a short-term loan, ramping up credit card debt or turning to family or friends for cash.

Two-fifths (40 per cent) of those surveyed said they would not admit to friends or relatives if they were struggling with housing costs, and one quarter (25 per cent) would feel too “ashamed” to get help.

Liz Clare, a Shelter helpline adviser, said: “Anyone at the school gates, in the supermarket or at work could be silently struggling.

“Times are tough, and we often hear from people who’ve reached crisis point because they haven’t felt able to ask for help earlier.”

Shelter quoted mother-of-two Katharine Whittaker, who lives near Barnsley in Yorkshire, and often struggles to pay her rent despite working as a call centre manager. She said: “I’ve borrowed from family and I’ve had to ask the bank for an overdraft just to keep our heads above water. It’s a constant worry.”

The payday lending industry is being investigated by the Competition Commission over concerns including lenders appearing to be reliant on borrowers who cannot afford to pay loans back on time, meaning that the original cost balloons. The commission will produce a report later this year.

Earlier this week, consumer group Which? accused payday lenders of “exploiting” customers who default on loans with over-the-top fees.

Payday firms last year came under regulation by the Financial Conduct Authority, which has already outlined plans to crack down on the sector.

Shelter chief executive Campbell Robb urged those struggling with rent or mortgage payments to seek help.

He said: “Our message today is don’t keep your worries to yourself. Shelter’s expert advisers can be the difference between keeping your home and losing it.”

Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents major short-term lenders, said: “We advise anyone who is regularly struggling to pay their rent or mortgage not to try and borrow their way out of trouble.

“Responsible lenders will help you with a repayment plan.”

 

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