A new review of people’s personal loan debts across the UK has found that somewhere in the region of one in three people with outstanding loan and credit card debts has taken out a pay day loan at some point.

The news comes from the debt consultancy firm Vincent Bond & Co in their quarterly debt outlook, which found than 28 per cent of those people who were already struggling with their debts, had taken out a pay day loan in order to try and make ends meet.

As it has become much harder to obtain a traditional bank loan since the credit crunch, many individuals have turned to pay day loans as the only alternative method of getting the loan they require, despite the high cost of this type of loan.

In 2009 the number of pay day loans being taken out had grown by four times the figures for 2006, with 1.2 million borrowers taking out a pay day loan, with a total loan amount of £1.2 billion.

With this rate of growth being carried forward to the present day, the report estimates that somewhere in the region of 3.5 million people in the UK are likely to take out a pay day loan within the next six months.

Borrowers have been advised to avoid using pay day loans, particularly as a long term loan solution to a debt problem. Alternative solutions to personal loan and credit card debt are debt management plans or an Individual Voluntary Arrangement (IVA).

Steve Rees of Vincent Bond & Co said “Since the start of the 2009 recession, pay day loan companies have managed to pop up overnight. For some debtors, the only answer they can think of is resorting to a pay day loan or loan sharks, but these are fraught with problems.”

Cheap Loans.co.uk, along with several other companies, has been targeted by criminals operating a loan scam.

These individuals are contacting people who have applied online for a personal loan, claiming to be from Cheap Loans and telling people that they have been accepted for a loan and that the money will be in their account within a short time. THESE PEOPLE ARE NOT FROM CHEAP LOANS!

The applicant is then asked to send a money transfer voucher, such as U Cash, Moneygram, or Western Union, for example. The explanation for this could be for various reasons such as: admin fee, first repayment amount, tax, or to prove that the applicant is able to pay the loan.

These people may seem very convincing, but if you receive a call of this nature it is a scam- you have not been approved for a loan and they will just take your money and possibly come back for even more.

Cheap Loans will only pass client details to a reputable loan broker, who will then contact you and will not ask for any fees in this manner. Cheap Loans will NEVER contact you directly or charge up front fees for a loan.

If you have been contacted in this manner DO NOT SEND ANY MONEY!

You may contact Cheap Loans directly via the contact page on our website if you require more information and you should contact the police immediately, giving them as much information as possible.

For some time now, many individuals in the UK are living on loans and credit cards to make ends meet with their finances and pay their bills, with Christmas being a particularly busy time for people applying for a new personal loan or using their credit card.

But the latest figures from the Bank of England have shown that many people seem to be taking their personal loan and credit card debts more seriously, as the amount of outstanding consumer credit on unsecured loans and credit cards actually fell over the course of December last year.

Although the levels of consumer credit increased by around £0.4 billion as a six month average up to the end of last year, the figures for the month of December alone showed that the overall amount of unsecured loan and credit card borrowing fell by £0.4 billion.

This shows that many people were making a serious attempt to reduce their personal loan and card debts in the run up to Christmas, at a time when people are traditionally taking out new loans and running up large balances on their credit card.

Within the consumer credit market, which includes unsecured loans and credit cards, the twelve month average growth rate fell by 0.7 per cent to reach just 1.8 per cent.

Within these figures, the amount of credit card borrowing for the month of December remained around the average figure for the whole of the year, however, the amount of borrowing through unsecured loans fell by £0.4 billion.

At the same time, gross lending on home owner loans and mortgages increased by £13 billion throughout the month of December, which is significantly more than the six month average figure of just £11.9 billion worth of new loans.

Pay day loans have become increasingly popular over the course of the past couple of years or so, as an alternative to traditional high street bank loans, largely due to the cautious lending approach of most banks, which has restricted many borrowers from taking a cheap loan from them.

Despite their popularity, pay day loans have rarely been very far from the headlines, particularly due to the high rates of interest which are often charged on this type of loan and the potential for unmanageable loan debt caused by “rolling over” existing loans into new pay day loan agreements.

There have been many calls from consumer charities for the government to introduce legislation and to place a cap on the number of times a pay day loan can be rolled over and although the government have not introduced any such regulation, one trade body has introduced its own code of conduct for pay day loans.

The Finance and Leasing Association (FLA) has now introduced a new code of conduct for its members, which limits the number of pay day loan roll overs to a maximum of three.

The UK’s largest pay day loan company, Wonga, has signed up to the new code of conduct from the FLA, which comes into effect on Wednesday this week. However, Wonga are the only pay day loan company which is a member of the FLA and therefore no other pay day loan companies are likely to take on board the new code of conduct at the moment.

Despite this, the Office of Fair Trading (OFT) and the Department for Business Innovation and Skills are both investigating the practices of short term loan companies and may well introduce legislation in the near future which forces other pay day loan companies to adopt a similar approach to Wonga.

The majority of areas within the financial service industry are now regulated by the Financial Services Authority (FSA), which ensures that consumers get the level of protection and the right advice on the financial products they buy.

Whilst products such as investments, protection, pension and home owner loan and mortgage products are all regulated by the FSA, one area which is outside this regulatory regime is that of consumer credit, which includes unsecured loans, credit cards and overdrafts.

Unsecured loans and other consumer credit areas are currently regulated under the consumer credit act, by the Office of Fair Trading (OFT), which does not offer the same level of consumer protection and advice, as other financial products which come under full FSA regulation.

The latest financial services bill is to be enacted shortly and this will see the end of the FSA, which is to be replaced by the Financial Conduct Authority (FCA) and the Financial Services Consumer Panel has proposed that unsecured loans and other consumer credit areas should be fully regulated by the new authority, once it comes into force.

Although the panel believes that unsecured loan and consumer credit regulation should be transferred to the FCA as soon as possible, they have also said that preserving the existing protection arrangements for consumer credit must be the over riding priority for the personal loan industry.

It is hoped that the plans will enhance consumer protection for those taking out personal loans and overdrafts, but new regulation could also make it harder for some individuals to get the loan they require and others may be excluded completely.

Adam Phillips of the Consumer panel said “The panel is calling for a common sense reform that will enhance consumer protection. Transferring the Consumer Credit Act powers to the FCA will make retail financial services regulation work in the way that most people expect.”