Payday lending relied on by 1 in 20 families

Family debt levels have reached their highest since 2011 with one in 20 relying on payday loans to get by.

The figures were released in a report by Aviva Family Finances also revealed that average household debt had risen from just over £9,000 a year ago to almost £13,000, the largest since the study began in January 2011.

The annual debt included around £2,011 borrowed from friends and family, £2,000 put on credit cards and £1,959 in personal loans.

Head of policy at debt charity StepChange said the report showed the increasingly fragile nature of many household budgets;

“That 5% of families now rely on payday loans highlights how for a substantial proportion of the population simply meeting essential living costs is becoming increasingly unaffordable.”

The report comes only two weeks after the Office of Fair Trading referred the payday lending industry to the Competition Commission after uncovering evidence of ‘widespread irresponsible lending.

Concerns have been raised by the regulator that some companies are not carrying out checks to make sure the borrowers can repay the loans and in some cases allowing borrowers to take out multiple loans, some of which incur interest rates of more than 5,800%.

Despite the increase in personal debt, the report uncovered evidence that more and more families were trying to save by putting away £96 per month on average which is a new high.  The take up of cash-free ISAS has also increased to 36% holding the product a year ago to 41%.

However, Louise Colley, protection distribution director for Aviva said;

“Building a savings pot is a fantastic step but if debts are growing, families need to consider which is the more pressing need.”

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