Soaring cost of living sees borrowers turn to payday loans

The soaring cost of living combined with job losses and reduced income is set to leave even more households struggling to pay their debts in the coming months.

Uncertainty leads to vulnerability

The ever-growing gap between escalating living expenses and uncertainty in employment has left families particularly vulnerable. Last year, households with children needed an additional £650 per month just to cover everyday costs compared to households without kids. Even worse off were families with more than three children who found themselves, on average, £45 short each month of the money they need to live off. Many of these families will also rely on either a payday loan or a credit card to see them through the month.
The loan industry and websites like simplepayday.co.uk/bad-credit-payday-loans has reported larger numbers of vulnerable people applying for loans this winter. While many people are in a position to re-think unnecessary outgoings and cutback when they need to, couples with children have less flexibility to reduce their costs meaning they are more likely to take out credit just to meet their living expenses.
The statistics, published by the debt charity Consumer Credit Counselling Service (CCCS), come at a crucial time for families; not only are they facing  fewer tax credits but also an increase in interest rates and higher rate tax thresholds – changes that are now likely to affect middle-earning families as well as those with lower incomes.
A freeze in pay increases and falling incomes combined with rising living costs is already having a significant effect on people’s ability to repay their debt. Last year, a third of CCCS’ clients were unable to cover the cost of everyday living let alone repay their debts.

While average debt levels may be beginning to slowly fall, there are many still suffering at the hands of our economy. Although we may be sick of the continuously bleak outlook, there is no question that this continues to be a tough time for Brits. With our purchasing power squeezed to the max and spare cash at a bare minimum, let’s hope that George Osborne’s Budget next week has even the slightest hint of good news.

Is it all doom and gloom?

It seems like every blog that I do, I bring with me some doom and gloom about the economy. I’m afraid that this one is no different; as this week has brought with it the news that new research has shown that we are over £1000 worse off than we were in 2009. It feels like we are always in a constant state of limbo with our finances, wondering if there is light at the end of the tunnel.
BBC1’s Panorama have looked into the facts and figures and claim that the average employee has seen the value of their take home pay plummet by £1,088 ( or around 5%) since the middle of the recession. The study found that while the average annual salaries are around £20,419, (after tax), when the impact of inflation was factored in, the buying power of people’s pay is actually lower now than in 2004.
Unfortunately, it is not good news if you work in the construction sector, because the report showed that area was most affected, with the value of take-home pay falling by £1,188 a year, since 2009. The research also found that around 660,000 households are still struggling to make their mortgage payments and over 100,000 people are in arrears.
A lot of this difficulty with pay has probably arisen from the fact that people are so fearful of losing their jobs making them too afraid to ask for a pay rise. Also because a lot of companies are struggling with low profits meaning they just don’t have the capability to raise wages. It is widely predicted that interest rates are set to rise at the end of the year, which would cause a devastating effect to so many households. If it rises by even half a percent to 1.5%, a further 36,000 households would start to struggle. If rates returned to their pre-credit crunch level of 5%, it would take the total of people who would have difficulties making payments to a staggering 179,000.

It’s about high time that things were made easier for all of us, with so many households still struggling to make ends meet. It’s no wonder so many people are having to make tough decisions to ensure the security of their families.