The demand for free debt advice is on the rise

One of the main reasons for the rise in demand for free IVA debt advice and IVA debt advice is due to the introduction of pay day loans with the number of individuals seeking such advice doubling last year compared to 2010, according to the Consumer Credit Counselling Service (CCCS).

The CCCS has found that since 2009 there has been a six-fold increase in the number of people approaching them with payday loan debts. So what are pay day loans and why are they causing individuals to have financial difficulties?

If you require free IVA and debt advice please contact X-debt now.

Payday loans tend to be short-term loans that companies pay out to consumers almost immediately; these loans typically cover relatively small amounts that must be paid back promptly. The idea of the payday loan is that individuals that are struggling to pay their bills can get a type of advance on their wages and pay it back on pay day. On the face of it, this sounds nice and convenient; however these loans carry shockingly high annual interest rates of up to 4,000 per cent, meaning that individuals can build up significant debts if they do not repay the loans on time – this is where the increase in individuals seeking free debt advice has come in to play.  Some statistics on pay day loans may highlight the current situation: the average loan is £300; two thirds of borrowers have an annual household income of less than £25,000; in 2006, there were just 300,000 payday loan borrowers yet by 2009, there were 1.2million and in 2010, there were a huge 1.9million.

A group of MPs has recently criticised these payday loan companies for encouraging people to take on debt with repayment rates that are totally unsustainable and they have called upon the government to enforce stricter regulation. MPs are demanding new laws to stop companies offering high-cost, short-term credit which is exploiting the vulnerable. Amongst the demands of the MP’s are calls for improved transparency so that borrowers would have a clear idea of the type of loan they’re taking out and the scale of penalties if they’re can’t repay on time. Adrian Bailey MP commented on the situation:

‘During these difficult economic times, increasing numbers of people up and down the country – not least some of the most vulnerable members of our society – are relying on the provision of consumer debt management services and payday loans to make ends meet.’

At X-debt we offer free debt advice, so if you are struggling to pay off your debts, one of our debt specialists will be happy to discuss your situation. If you are considering an Individual Voluntary Agreement to manage your debts we also have in-house IVA specialists that can give IVA advice.