Millions of Britons are likely to take out a payday loan in the next six months
As many as 3.5 million people in the UK are likely to take out a payday loan in the next six months, according to a group of insolvency experts.
R3, which represents "professionals working with financially troubled individuals and businesses", bases its claim on interviews with 2,000 people.
Some 60% of those surveyed are worried about their level of debt, and 45% struggled to make their money last until payday, R3 said.
With Christmas fast approaching, many families are feeling the financial pressure and some will need a little help to make it through the month. Payday loans allow people to borrow small sums of money on a short term basis until they get their salary. It's a relatively expensive option, but it is one that some people like to consider.
There are a range of companies offering payday loans and, while terms vary, people can expect to pay up to £30 for every £100 they borrow provided they do so within a month. High interest rates mean that waiting months can lead to the debt multiplying.
The companies offering payday loans point out that people have to have a job and a bank account in order to get one. However, the research for R3 suggests that one in six of those who do borrow money are so-called zombie debtors - basically they have enough money to pay off the interest but not pay off the debt - and that means they keep on paying.
Frances Coulson, R3's president, said: "It’s worrying to see that the 16-24s are developing bad money management skills so early on. Fewer people than last year, across the board, have borrowed money but there are still some weeks until Christmas.
"With unemployment figures up, we can only expect to see more people saying they are struggling to afford the demands of the festive season.”
However, John Lamidey from the Consumer Finance Association comments: "payday loans are simply designed to manage your short term cash flow. They're not for long term borrowing, they're not for dealing with major issues, they're for dealing with those issues where you need a couple of hundred pounds for a few weeks."
"Only half the adult population uses credit at all, so you've got to knock that in half. So I'm really sceptical about these figures.
"They've extrapolated from a very, very tiny sample. Our experience is that 94% of our customers are totally happy with the product that they're getting, 97% say that the loan is totally transparent and 86% say that they would recommend a friend."
The Consumer Credit Counselling Service has suggested payday loans should be treated as a last resort.
Delroy Corinaldi, director of external affairs said "If you do take one out, make sure you can pay in full and on time and never roll the loan over from one month to the next."