Payday loans adversely affecting UK Economy

This article was last updated on April 16, 2022

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The payday lenders are facing increased financial pressure as the Christmas celebration days are approaching.

The static salaries and rising inflation is hurting many Britain families in a negative manner and this is of utmost concern for the policy makers and regulators of UK. An insolvency experts’ report has revealed that “professionals working with financially troubled individuals and businesses”, consumer money worries are at the top most level ever recorded. While, the citizens are still going to borrow the loans that they cannot even handle to pay. “Pay day loans” that typically worth up to £400 and has a deadline to pay within a month has now quadrupled within the past couple of years. One out of the six payday lenders has now became a “zombie debtor”, who can only pay the interest amount while the principal amounts adds up and maximizes the debt pressure.

The Consumer Affairs Minster, Ed Davey has suggested that people should think carefully before taking these loans and should also calculate the alternative to pay them back as these loans mechanism carry along a lack of transparency.

It is however, somewhat weird that the regulators themselves are unaware of the loan mechanism. Surprisingly, the regulators cannot even suddenly suspend the licenses of traders employing bad practices and exploiting the consumer loan borrowers. Borrowers should be made aware regarding the loan’s total cost and expense. They should also be restricted not to get multiple loan back to back as it will not help them instead will make their lives worse. All of his will not help unless policymakers address Britain’s high debt culture. The UK has one of the highest levels of household indebtedness in the developed world. If more individuals will go to borrow more to make their living then there is an increased risk that the Britain’s economy will get trapped in an inescapable spiral of debt.

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