Pictured: Matthew Hammond
As nearly half the Midlands population (48% in the West Midlands
and 43% in the East Midlands) struggle to make it until the pay
cheque arrives, taking out a payday loan will become a reality for
many. New research by insolvency trade body R3 reveals that across
the whole of Great Britain, 3.5 million adults are considering
taking out a payday loan over the next six months.
R3 Midlands chairman Matthew Hammond, a partner at PwC in the
Midlands, said: "Payday loans are not the best way to resolve debt
problems. We know that many who take them out find them to be a
negative experience, often escalating money troubles."
A new group of 'zombie' debtors, who currently pay only the
interest charges on their debt and not the debt itself, has also
been identified by R3's research. One in six (16%) individuals
across the UK is only able to pay the interest on their debt rather
than paying off the debt itself. This breaks down into 11% who are
only servicing debt on their credit cards, and 9% who are only
paying the interest charges on their overdraft.
Matthew Hammond continued: "We hear talk of 'zombie' businesses,
but seeing individuals run their finances in the same way is
troubling. This group will have very few options should interest
rates rise or their circumstances change."
The highest ever levels of concern over debt were recorded in
this quarter's Personal Debt Snapshot run by R3, with nearly two
thirds (60%) of individuals across the UK worried about their debt
levels. This is up 13 percentage points on July's figure and 21
percentage points up on this time last year.
R3's research also shows that of those sampled in the Midlands,
over 60% are worried about their current level of debt (63% in the
West Midlands and 62% in the East Midlands).
As concerns about debt rise, R3's research reveals that people
are saving less. The number of individuals with no savings at all
has risen sharply from 19% last quarter to 27% this quarter.
Overall, 40% of the population is saving less at the moment than
usual, compared to 27% of the population a year ago.
Matthew Hammond added: "Having a financial buffer is crucial to
weathering periods of difficulty. If struggling to make it to
payday becomes a regular occurrence, seeking financial advice
should be a priority rather than trying to exist on short term,
high interest credit."