Yet more Scots could be mired in serious debt difficulties after the coming festive season as a growing number turn to pay-day loans to fund their Christmas spending.
Experts have warned of a new phase in the personal debt crisis north of the Border after a study revealed that the number of Scots struggling with pay-day loan debts is now double the UK average.
A fifth of Scots are finding it difficult to reach pay-day without getting deeper into the red because they are trying to repay pay-day or similar loans, compared with one in ten across the UK as a whole.
The research, by insolvency trade body R3, found that 7 per cent of Scots have prioritised pay-day loan repayments over spending on food. A fifth of those surveyed believe their finances will deteriorate further over the coming months.
Its latest debt snapshot comes amid growing fears over the exploitation by pay-day lenders of festive spending worries.
R3 member Iain Fraser described the extent of pay-day loan debts in Scotland as “staggering”.
“If used in the right way, to fill a genuine one-off gap in finances, a pay-day loan does have a place. However, they are increasingly being taken on as a debt solution instead of a financial solution.”
Those forced to cut back on essentials so they can repay their loans are likely to find themselves facing bankruptcy, he warned.
Fraser also hit out at the way in which pay-day lenders are targeting younger generations, with the research showing the popularity of pay-day loans to be greatest among those aged 18 to 24.
“These loan companies operate glossy websites and even sponsor football teams and are capitalising on a generational shift in attitudes towards saving and debt,” he said.
Those marketing campaigns are stepping up a gear as Christmas approaches. Many pay-day loan firms are promoting themselves as providing an easy way of getting hold of cash for festive spending.
Pay-day loan giant Provident Financial has added Christmas scenery images to its website, which promotes cash loans of 399.7 per cent, and is running Google search adverts urging consumers to “make Christmas special with extra cash from Provident”.
Another firm, Pay-day Express – which is part of The Money Shop and charges 2,671 per cent APR -–is advertising itself as a “good solution” to Christmas cash worries. Other websites promoting Christmas loans have APRs of up to 4,248 per cent.
Rod Ashley, chief executive of Scotwest Credit Union, said it was inevitable that many Scots will be looking for short-term cash over the Christmas period.
“For many, the quick solution will be to turn to credit cards, overdrafts or short-term loans. It is essential that people look at all of their options when borrowing, know the full implications of any loan they are considering taking out and think about how they are going to pay the money back.”
The short-term nature of pay-day loans is their big appeal, Ashley noted. But short-term solutions can lead to longer term financial disaster, he added. “What often seems like a quick-fix can in reality leave people in a worse situation,” he said.
“As a result, borrowers are increasingly faced with a vicious cycle, with many resorting to borrowing more money to pay off their rising debt.”