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, revealed new research from Kantar TNS.
The firm conducted a survey on British adults about their borrowing habits, and found that 59% of those who had used a payday lender said they had experienced hidden or unexpected fees, charges or interest. The research further illustrated that one fifth of those who had 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 did not feel confident assessing all the options available to them before deciding to use a payday lender or an alternative.
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.
Kantar revealed that only 20% of 18-24 year olds have owned a credit card, less than half that of any other age bracket. Furthermore, when analysing students’ borrowing habits, Kantar found that only 12% of 18-24 year olds have an authorised overdraft from their bank, while twice as many 35-54 year olds admitted to doing the same.
Commenting, Kantar TNS managing director of financial services and technology Martin Dewhurst 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.”
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