Payday Loans: The Impact on real people

I borrowed £100 for a night out and ended up owing £19,000

  • Danny Cheetham got into debt after taking out a number of payday loans
  • Even though he was in financial difficult, firms kept loaning him money
  • Many payday loan companies use tactics to encourage you to borrow from them

Spiralling out of control

Danny Cheetham was a 19 year old university student when he took out his first payday loan ten years ago he only wanted £100 for a night out paying back £128 after 22 days didn't sound like a bad deal.

However, as soon as he cleared the first loan, the now-defunct Wonga offered him another. This time, he could have £420 for 38 days. When the time came to repay £585, an unexpected bill meant he didn't have the money. As a result he went to another high-cost short-term lender to borrow £275. This grew into £538 with interest. Over the next decade, things began to spiral, with Danny bouncing between payday lenders, borrowing hundreds at a time to pay off the firms chasing him.

High-cost loans were transferred to his bank accounts within minutes following a text. Loans were approved, worryingly, despite Danny's overwhelming debts.

Towards the end of last year, 2017, he was offered three separate loans totalling £1,240 before he had paid off the first.

In total, he thinks he has paid almost £19,000 in interest to payday lenders.

The pressures leading up to payday would cause me at least a week of anxiety. I'd create endless spread sheet budgets, with percentages everywhere: "If I pay them 50%, pay this company 25%, if I walk to work I can save this amount " Payday became the day of facing up to everything I owed and thinking about another month to go with no money left.

Danny contemplated suicide. The idea of just disappearing used to constantly play on my mind - I wanted to escape the pressure of it all.

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The importance of speaking to someone

Danny, who had kept the mounting debts a secret from his family and friends, says: 'It's shocking how easy companies made it for me to borrow more. I was in trouble and thought these loans would ease the stress. But it never went to plan.'

Danny, now 29, has his debts under control and is set to be clear of them by the time he is 30.

New tactics from the lenders

Experts say his story highlights just how easy payday loan firms make it for people to rack up expensive debt.

And while Wonga is no more, there are dozens of other firms popping up in its place with even more ruthless tactics:

  • Some promise to put money in your account in as little as 90 seconds
  • Others allow borrowers to extend their loan just by sending a text message
  • Some offer bonuses if you refer a friend and pay cash back if you borrow more
  • Another says it monitors customers bank balances and automatically tops up their account if it falls below a certain amount

Experts say that adverts targeting families and young people are normalising what is a very costly way to borrow money.

Some firms claim to be an 'alternative' to payday loans when, in fact, they work in much the same way.

Examples of a "Responsible Lender"

Lending Stream

Lending Stream was set up in 2008, claims to be a responsible provider of alternatives to payday loans.

The firm, based in north London, says it can send money to your account in 90 seconds and will allow customers to take out multiple loans at a time.

New customers can borrow up to £800, while those returning can get loans of up to £1,500 over six months. Standard interest rates are 1,333% but can be as much as 1,721%.

Someone borrowing £200 over six months, for example, would have to pay back more than £386 including £186 in interest.


Oakam, another north London based lender, offers borrowers points for referring friends and for making repayments, which can be turned into cash or vouchers. You will also be paid £1 for every friend you invite to take out a loan through Oakam (up to five a week).

If they apply for a loan, you will get a further £3, plus £10 if they are approved. The firm, set up in 2006, even rewards you with points for downloading and signing up for its mobile app but it charges up to 1,421% interest on loans. So if you were to borrow £800 over six months you'd pay back £1,502.

Safety Net Credit

Launched in 2012, Safety Net Credit claims to be cheaper than an overdraft. Customers are required to give the firm their sort code, account number, debit card details as well as Internet banking passwords, so it can have access to their bank account. You set a balance level and when it falls below this, the firm automatically tops it up.

When you have enough funds, it helps itself to a repayment. Safety Net Credit charges 80p a day per £100 borrowed.

Interest is 68.7%. So £500 borrowed for a week would cost £28 in interest. The same overdraft would cost 70p with First Direct.

A spokesman for Safety Net Credit says it offers a cheaper alternative to overdrafts and makes affordability checks. If the credit line becomes hard to manage it says it will work to resolve the situation.

Debt charity Stepchange says it is concerned that any incentives encouraging taking out credit could distract from the important things such as rates.

Stella Creasy, Labour MP for Walthamstow, said: 'High-cost credit companies hook people into a spiral of debt. Rather than treat people fairly and mend their ways, those same companies which offered eye-watering rates of interest are now simply changing the label on their loans.'