Almost 60% of payday loan users have been forced to pay back more than they expected as a result of hidden or unexpected fees charged by lenders, according to new research by Kantar TNS.
In a survey of 1,217 British adults about their borrowing habits, 59% of those who had used a payday lender said they had experienced hidden or unexpected fees, charges or interest. The research also showed that one fifth of those who used a payday lender did so without fully understanding the conditions that were quoted to them.
A third of all respondents to the survey said they didn’t feel confident assessing all the options available to them before ultimately using a payday lender or an alternative, potentially seeing them lose out on the best possible deal for them. For example, three times as many people have taken out a payday loan than have used a credit union – when for many the latter could have been a more sustainable way to borrow.
The current cohort of under 25s seems to be living up to the ‘generation sensible’ tag given to it by some and are in fact considerably less likely to have used a credit card or an overdraft than their parents’ generation. The study revealed that only 20% of 18-24 year olds have owned a credit card, less than half that of any other age bracket. Even the much heralded student overdraft is not as significant as its reputation might suggest. Despite the typical student stereotype, only 12% of 18-24 year olds have used an authorised overdraft from their bank, while twice as many 35-54 year olds admitted to doing the same.
Martin Dewhurst, Managing Director of Financial Services and Technology at Kantar TNS, said, “Payday lenders may be a source of quick cash when a boiler breaks down or the car needs a service, but it’s vital that users understand exactly what their obligations are. Confidence in financial services is already low, with our research showing that only a quarter of men and just 15% of women* are confident in handling their finances. Given that a fifth of people accepted payday loan offers without fully understanding the terms quoted to them it’s probably not surprising that well over half of consumers who use these services have been stung by unexpected fees.
“For most people, payday lenders are only one of several borrowing options available. Knowledge is key, and consumers need to make sure they’re aware of all the options available to get the best deal and avoid paying back more than necessary.”
Notes to editors
Full data tables are available here.
These findings are based on the responses of a demographically-representative group of 1,217 adults (aged 16+) in Great Britain. The research was conducted between 13 – 17 September 2018 by Kantar TNS Research Express.
*Starred data was produced in a separate study by Kantar TNS. ‘Winning Over Women’ used a variety of survey methodologies which can be found in the full report, including social media analysis of over 600,000 online conversations, and over 30,000 interviews with women.
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