The dangers of multiple payday loans

StepChange Debt Charity
by Lovemoney Staff StepChange Debt Charity on 24 October 2012  |  Comments 6 comments

Payday loans can fulfill a role as a one off. But for too many borrowers, that one off turns into a payday loan habit.

The dangers of multiple payday loans

Payday loan companies have received a lot of stick recently. A bishop says their interest rates are sinful, they’ve been derided for advertising to toddlers, they’re alleged to have lent to under 18s and there’s been a big hoo-hah over sponsorship of Newcastle United which has led one company to be accused of targeting the most vulnerable.

Typically these loans are for small amounts of money for short periods of time. If you borrow long term, then they will cost you a disproportionate amount of money. The APR for these loans seems astronomical, but as you know, APR is a measure of annual interest and payday loans are not designed to last that long.

In their favour, when the fees involved are clearly stated upfront and they are used for only a short time these loans can be useful in certain situations.

The rise of payday loans

Payday loans become a problem when they become a habit. We’ve seen a huge rise in the number of people contacting us for help, to the extent that we take five times more calls about payday loans than we did three years ago. The number of people with more than ten payday loans has shot up; more people have called us with ten or more payday loans in the first six months of this year than the previous three years combined.

For some, the temptation to take out more and more payday loans is hard to resist. It could even be argued that they become addictive: we know of one man – now a campaigner against payday loans - who took out 60 in 18 months! This might be an extreme case, but there is no denying the rise of people having problems with payday loans.

The payday loan cycle

Many of the people we speak to with multiple payday loans have used them in a similar way:

  1. Your income isn’t quite enough to cover your living costs one month so you take out a payday loan to plug the gap.
  2. The next month your financial situation is still strained, so you recycle the loan by paying another month of interest instead of repaying the balance.
  3. The cost of recycling the loan just adds another expense to a budget that is already over-stretched, so the money runs out sooner and another payday loan is needed to help cover essential living costs.
  4. Every month you go back to step two and repeat the cycle.

We’ve spoken to thousands of people who have experienced this pattern. It would be easy to think that those taking out payday loans are using them to fund a reckless, carefree lifestyle.

Our experience is that most of the time it’s actually stressed-out people in a difficult situation who just want to support their families or pay the utility bills. Taking out many payday loans offers an immediate solution, but all too often they make a bad situation worse.

CCCS call for action

One of the things that make payday loans so tempting is the speed and ease that you can borrow money. However CCCS would like to see the payday loan industry taking more steps to prevent people from getting into trouble with these kinds of debts.

Delroy Corinaldi, our external affairs director, has said: “Multiple payday loans can very quickly become unmanageable and CCCS sees the consequences of people trying to manage numerous payday loans.

“Measures must be put in place to ensure that more people don’t find themselves in this situation and CCCS calls on the payday loan industry to address this issue urgently.”

How to deal with multiple payday loans

If you’re considering a payday loan, it might be prudent to take a step back and consider what other help is available. As we say on our own blog, it can be painful but avoid the payday loan headache, and we recommend searching for other sources of short-term finance.

If you find yourself with multiple payday loans and don’t know how to repay them, get in touch with us. You can get free debt advice using our online tool, Debt Remedy. We can help you make a realistic plan to get your finances back on track, even if you’ve got multiple payday loans.

More on debt:

Overdrafts: the debt problem you didn't realise you had

New laws mean credit card debt can affect your mortgage

Budgeting was easier when we were paid weekly

Why a 0% credit card could mean 100% trouble

Bankruptcy: handing back the keys to your home

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Comments (6)

    Love rating 4

    Payday loans: if you need to use one your either very stupid or very very desparate. In my exes case she had a bad gambling / deception problem and was using multiple payday loans to fund it in the end. that wasnt before she cleared out her life savings, cleared out her dad and started to clear me out before i got wise. oh! and she pawned the ring i bought her a few days after we chose it together last christmas.

    Payday loans ruined my girlfriends life and our long term relationship. After trying to help her for a long time shes now history. I made a lucky escape. I lost and am still owed a good few grand but the loss was a small price to pay for the lesson learned.

    These payday loans should be made illegal at once. Only people who cant get better credit use them because they have been stupid with money before. They pray on the poor, the needy, the stupid, addicts and the desparate.

    Why would somone with half a brain buy such a poor value product? they wouldnt.

    Occasionally you hear someone chime in saying. "I had a payday loan it was quick easy and it only cost me x to have the loan until payday, it was great for me" I say bollocks to that. Your an idiot, why are you supporting and endorsing something that is so inherently evil.

    Report on 24 October 2012  |  Love thisLove  0 loves
  • nosbort
    Love rating 168
    nosbort said


    For one with so many strong opinions on others' stupidity you show so much yourself, If you could manage to use English we could probably all understand much more of what you opine so ineloquently.

    Report on 24 October 2012  |  Love thisLove  1 love
  • PDB11
    Love rating 75
    PDB11 said

    With all respect, Dr Money-Schnitzel, if I read your story aright, I think it was gambling that ruined your former girlfriend's life. Payday loans gave her the tools to do so; but if I had to pick the source of the evil there, the thing that should have been dealt with and wasn't, I would go 100% for the gambling.

    Look at it this way: if gambling had been available to her, but payday loans not, she probably would still have gambled away her savings, her father's and much of yours. If payday loans had been available to her, but gambling not, I think you would all be much happier and better off today.

    This is not to say that I approve of payday loans. They are one of those many products that come in the "if you need it, you ought not to be using it" category. But I don't think you can blame them for your ex-girlfriend's problem, or call them "evil" because they exacerbated it.

    Report on 25 October 2012  |  Love thisLove  0 loves
  • fenemore
    Love rating 255
    fenemore said


    I agree with nosbort, your posting is almost illegible - the most appalling use of English.

    As for payday loan companies - my opinion is probably unprintable!

    Report on 25 October 2012  |  Love thisLove  0 loves
  • rick184
    Love rating 3
    rick184 said

    Pay day lenders market themselves as a quick and efficient way to borrow small amounts for short periods of time. As the article points out many get into the spiral of missed repayments, higher interest and further loans. Credit Unions are working hard to provide alternative lending products and of course much lower interest rates as these are regulated by FSA. Anyone in the spiral of increasing debt should talk to their local Credit Union as they may be able to help. I have heard countless testimonies from people rescued from the grip of debt with help from their Credit Union.

    Report on 25 October 2012  |  Love thisLove  0 loves
  • Debtless
    Love rating 0
    Debtless said

    Debtless is a European funded Grundtvig Partnership project which is in its second year now, with partners in UK, Czech Republic, Italy, Slovenia, Lithuania and the Netherlands. We have also been looking at Payday loans - so please have a look on our website blog! at:

    Report on 14 November 2012  |  Love thisLove  0 loves

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