Almost half the West Midlands population struggle to stretch their finances to pay-day – and many households are turning to payday loans in desperation.
New research by insolvency trade body R3 has revealed 48 per cent of people in the region and 43 per cent in the East Midlands are turning to high interest payday lenders to pay their way.
And an alarming new group of “zombie debtors” who can only afford to meet the interest charges on their debt has been identified.
R3 research reveals that across the whole of Great Britain, 3.5 million adults are considering taking out a payday loan over the next six months.
R3 Midlands chairman Matthew Hammond, a partner at PwC in the Midlands, said: “Payday loans are not the best way to resolve debt problems. We know that many who take them out find them to be a negative experience, often escalating money troubles.”
Meanwhile, one in six (16 per cent) of individuals across the UK is only able to pay the interest on their debt rather than paying off the debt itself.
This breaks down into 11 per cent who are only servicing debt on their credit cards, and nine per cent who are only paying the interest charges on their overdraft.
Mr Hammond added: “We hear talk of ‘zombie’ businesses, but seeing individuals run their finances in the same way is troubling. This group will have very few options should interest rates rise or their circumstances change.”
The highest ever levels of concern over debt were recorded in this quarter’s Personal Debt Snapshot run by R3, with nearly two thirds (60 per cent) of individuals across the UK worried about their debt levels. This is up 13 percentage points on July’s figure and 21 percentage points up on this time last year.
R3’s research also shows that of those sampled in the Midlands, over 60 per cent are worried about their current level of debt (63 per cent in the West Midlands and 62 per cent in the East Midlands).
As concerns about debt rise, R3’s research reveals that people are saving less. The number of individuals with no savings at all has risen sharply from 19 per cent last quarter to 27 per cent this quarter. Overall, 40 per cent of the population is saving less at the moment than usual, compared to 27 per cent of the population a year ago.