A ‘DEBT tsunami’ is set to engulf Britain, Labour MP for Walthamstow, Stella Creasy warned yesterday.
Consumer magazine Which? has just issued its Quarterly Consumer Report, which shows that 2.4 million households borrowed money from family and friends, while 11.3 million households took out additional finance.
And ‘insolvency experts’ at R3 warn that new research has shown that five million Britons are considering taking out a payday loan within the next six months, a 50 per cent rise in a year.
It also found that one in four 18-24 year olds are likely to seek a payday loan.
Creasy said: ‘The government really needs to get a grip and back all the measures about capping the cost of credit before this debt tsunami engulfs whole sections of Britain.
‘People are borrowing in this very toxic way because of the high interest rates and the ways in which these products are marketed. They are getting themselves into further levels of debt.
‘A lot of people get caught thinking that they can pay it back at the end of the month and then obviously they find that the charges escalate and they haven’t got enough money, because they haven’t got enough money to pay for the goods in the first place.
‘So then they find the following month, that even if they manage to pay off the first loan, they are out of pocket earlier in the month so they need to borrow again. That’s why it gets so toxic because it is a spiral that people get drawn into.’
Last week it emerged that almost 40% of payday loans are taken out to buy basics such as food and the Consumer Credit Counselling Service (CCCS) said it had seen almost 16,500 people approach it this year with problems linked to payday loan debt.
Which? found that overall, British households are in debt by a staggering total of £1.4 trillion – 31% more than the UK’s national debt – while on average each household owes about £6,000 in unsecured debt.
Which? executive director Richard Lloyd said: ‘The level of debt owed by people in some regions is shocking, so the government must not cut funding for national debt organisations which provide a vital lifeline for those struggling with debt.’
• The number of homeless children and pregnant women living in bed and breakfasts has jumped by 60% in a year, according to a report.
Homeless Bound, by the National Housing Federation, also says more than a third of families with children living in B&Bs had been there longer than the government’s six-week limit, a 200% increase in two years.
