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Young people with debt more likely to get payday loan than go to bank

Young people under the age of 25 are more likely to turn to payday loan companies such as Wonga to make ends meet than approach their bank, building societies or a credit card provider, according to Citizen’s Advice.

It analysed 30,000 of the most serious debt problems it sees in its bureaux and found that while 10% of these were suffered by 17-24 year olds, payday loans accounted for 62% of the credit used by this age group. Only 8% of the 3,000 youngsters were in debt because of mainstream credit such as overdrafts, bank loans or credit cards.

Over a third of those who were suffering severe debt problems were not “Neets” – Not in Education, Employment, or Training – said Citizen’s Advice, but were in work.

“Generation Y is fast becoming generation credit,” said Citizen’s Advice chief executive, Gillian Guy. ““It is a big concern that so many young adults are turning to some of the most expensive types of loan to get by. Taking out a payday loan in your late teens or early twenties can have significant and damaging consequences for later life.”

Less well-known types of high-interest credit, such as guarantor and logbook loans, are also contributing to the severe debt problem suffered by the youngest borrowers. Guarantor loans are those in which another individual is listed as being liable for repayments if the borrower cannot make payments, while logbook loans use people’s car as security.

Separate research from the Financial Conduct Authority found that around 40,000 consumers took out logbook loans in 2013, typically borrowing £1,000 a time, although lenders offer sums of up to £50,000. Citizen’s Advice said it expected the number of logbook loans taken out to rise by 61% this year.

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Young people with debt more likely to get payday loan than go to bank

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