How do you pay off you mortgage or rent? Do you turn to payday loans to pay off bills that are overdue? Quick Loans explores why an increasing number of people are turning to payday loans and what steps need to be taken to prevent this.

Story Highlights:

The shocking statistics about people in difficulties with their priority bills
Reasons why people turn to payday loans to pay off bills for their accommodation: Britain’s housing crisis; welfare reform & cuts; wage freezes & changing work practices
How the government can tackle the problem: a rent cap; investment in more affordable housing; advisory services for the unemployed and low-earners
Advice for those struggling with priority bills

A payday loan is an ideal solution when you’re faced with an emergency and need cash to pay for something you hadn’t budgeted for. However, there’s growing concern that an increasing number of borrowers are using low interest loans to pay their priority bills. In particular, to cover a shortfall in their rent or mortgage payment.

In this article, we examine this issue in more depth. We look at what the statistics tell us about Britons and how they’re struggling to meet their financial commitments. Then we attempt to explain why this might be happening and what the government could do about the problem. Finally, we advise what to do if you find yourself in a situation where you can’t pay your housing needs.

Loans to Pay Off Bills: The Shocking Statistics

The short-term credit broker, Cash Lady, analysed the data of 300,000 payday loan applications and compared those of 2015 to those of 2017. They discovered that the number of Britons taking out a payday loan to cover their rent or mortgage payments has more than doubled in this short two-year period.

In separate research, the FCA found that people in rented accommodation are the most financially vulnerable of all social groups. Nearly half said they were stretched financially to near breaking point. Over a third said they would struggle to make ends meet with the smallest increase of only a few pounds. Of all Britons, both tenants and mortgage holders, 1 in 6 said they would be unable to pay for their housing if it went up by just £50.

The question is: Why is this happening?

Reasons Why People Turn to Payday Loans to Pay Off Bills

There are some possible reasons for this inability to pay for their housing needs. Let’s look at some of them.

There’s no doubt that the UK is facing an unprecedented housing crisis. The sale of council properties starting in the 1980s wasn’t accompanied by long-term planning to replace these properties. This shortage of public housing stock has pushed these tenants into the private sector. Other Britons who would typically have bought their own house have been blocked access to mortgages through banks’ stricter lending criteria in the wake of the 2007-8 crisis. Also, housing prices rose dramatically in the same period because of the massive increase in the buy-to-let sector. These factors have meant that demand outstrips supply and many private landlords have been able to take advantage of this by setting high rents.
The same period has been characterised by some measures to cut benefit payments (for the unemployed, families and disabled especially). The imposition of a benefit cap, changes in Child/Working tax credits and ‘sanctioning’ for job-seekers have combined to reduce how much money claimants receive in state aid effectively. As far as housing is concerned, the removal of the Spare Room Subsidy (or ‘Bedroom Tax’) has also reduced how much tenants in social housing are entitled to towards their rent. The introduction of Universal Credit and the massive delays in its payment have also led many tenants to fall into rent arrears.
Austerity measures have hit all sectors which directly affect their take-home pay. When living costs continue to rise but wage increases are low or non-existent, there will inevitably be a shortfall so people can’t get by. This is especially true for those in the public sector. It comes as no surprise that the survey carried out by Cash Lady found that workers in the NHS are in first place of those needing the helping hand of instant payday loan direct lenders. Job insecurity and business practices like zero hour contracts have also made it difficult for people to meet their financial commitments. If you have no guarantee of a steady income, it makes it doubly difficult to budget.

How can the Government Tackle the Problem?

A Rent Cap

A rent cap isn’t a popular idea for those in power. However, when so much of the rented housing stock is in private hands, it seems to be the only solution. The campaign group ‘Generation Rent’ believe that this cap should limit how much some greedy private landlords raise their rent so that it’s linked to inflation.

In 2016, the homeless charity found that rents had increased by an average of 12%. Is it any wonder that tenants find it increasingly difficult to pay it every month?

Investment in More Affordable Housing

Everyone welcomed the announcement that they will invest more funds to build affordable housing. However, increasing the housing stock by 50,000 new homes is a drop in the ocean. The government still needs to do more.

Whether at a local or national level, investment in public housing will also reduce how much they pay every year to house those who have been evicted in emergency accommodation.

Advisory Services for the Unemployed & Low-Earners

Did you know that every year millions of pounds of welfare payments go unclaimed purely because people don’t know what they’re entitled to?

An information campaign should be started to make sure those struggling are receiving all the help they so desperately need. Grassroots organisations can do this in each community but above all, through Job Centres. Although the information might be available online, many unemployed and low-earners don’t have internet access. They therefore can’t find out about all the aid they’re eligible for.

Are You Struggling to Pay Off Priority Bills?

Keeping a roof over your head is a basic human right. If you’re struggling to pay off bills for your housing (and all its associated costs such as your energy bills), there’s something seriously wrong. However, using direct lenders payday loans to pay off bills isn’t the right solution. Although short-term loans are suitable for emergency needs, they shouldn’t be used over the long-term for priority bills.

Instead, your best solution is to seek debt advice. If you have internet access, many websites like the Money Advice Service have tools which allow you to set down your income and expenses. They will allow you to draw up a budget.

If you have no broadband access or feel more comfortable talking to someone face-to-face, then organisations like Citizens Advice will be able to give you budgeting tips. They’ll also be able to advise you if you’re entitled to more legal aid which you haven’t yet claimed.

Conclusion: Payday Loans for Priority Bills

It’s outrageous that in 2017 so many people in the UK are facing difficulties in making ends meet. This is especially when we’re talking about priority bills and not extra luxuries.

When commenting on their report, the FCA director responsible said that sadly it wasn’t their responsibility to regulate the rental market. Only the central government can achieve this. Until this happens, short term loans for bad credit aren’t the answer. In fact, their repeated long-term use can make the problem worse rather than better. For anyone dealing with financial difficulties, the best solution is debt advice and not increasing their personal debts by taking out loans to pay off bills.

Taylor Rose
Taylor has been an avid writer since her early school days. At 5, she was creating candy floss planets where heroic candy canes stood up to the evil Russel Sprout. Later, she was documenting historic events, and her writing was always appreciated by all who read it. After working as a program developer for many years, she traded her successful career to make a living out of her writing skills. Nowadays, Taylor helps the Quick Loans Express blog bring current and useful information to people looking for helpful financial advice online – hopefully with a fun twist!

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