Recent figures suggest that people in the UK are being forced to turn to payday loans and credit cards such as Vanquis in an attempt to keep themselves above water. This results in crippling interest rates that families will struggle to pay back. Credit firm Provident Financial receives 2,700 applications per day for its Vanquis card, according to the Mail Online.

The Telegraph recently revealed that one in five Britons have three or more credit cards, with 17% using one of their cards at least once a day. A quarter of the UK’s 30 million credit cards saw an increase in interest rate over the last year, with credit card debts of £2,000 now taking two years to clear if you pay back £100 a month.

Roughly 15% of the UK’s total household debt of £1.46 trillion is attributed to consumer credit; this includes credit cards and unsecured loans. Credit cards alone are now accounting for £61.5 billion of the debt.

With consumers finding it increasingly difficult to get credit at an acceptable rate of interest, they are looking to cards such as Vanquis; average rates are 39.9%, but rates as high as 60% are possible because the advertised APR for all credit cards only needs to apply to two thirds of borrowers. Provident has also stated that it turned down 830,000 applicants, so many will be looking to payday loans in an attempt to survive through financial difficulties.

Chris Tapp, director of debt charity Credit Action, said: “The rates on these cards are very high… The fear is that while some of these people will hopefully have been put off, many will have to turn to doorstep lenders or payday loans companies which can charge exceptionally high amounts.”

Payday loans are essentially one step beyond the last resort; borrowers can easily be looking at interest rates above 1000%. Website PaydayUK.co.uk advertises a typical APR of 1737%, with QuckQuid.co.uk trumping that figure by showing a typical APR of 2356%. Even more astonishing than this is the APR offered by MiniCredit.co.uk - borrowers will be faced with a brain-shatteringly high rate of 3457%. On top of this, the word ‘typical’ means that 33% of applicants could be looking at a higher figure than initially advertised.

This entry was posted on Friday, March 5th, 2010 at 3:22 pm and is filed under Credit, Credit Cards, Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.