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Payday loan firms are making a comeback with a new wave of television adverts promoting high-cost loans with representative APR values of as much as 99.9 per cent.
The lender advertising, Everyday Loans, offers loans of up to £15,000 and has a maximum APR of 299.8 per cent.
According to the lender's representative example of 99.9 per cent APR, someone borrowing £3,000 over 24 months at an interest rate of 71.3 per cent per year would pay back a total of £5,706.
Under FCA regulations, borrowers cannot pay back more than double what they borrowed in the first instance for payday loans (svvf46Rq_havayol.com@asex.y.52.1@leanna.langton@c.or.r.idortpkm@johndf.gfjhfgjf.ghfdjfhjhjhjfdgh@sybbr>r.eces.si.v.e.x.g.z@leanhttps%3a%2F%evolv.e.l.U.pc@haedongacademy.org) with terms of less than one year. These rules do not apply to longer-term lenders.
High cost: Everyday Loans' advert promotes a loan with a representative APR of 99.9 per cent
Even so, there are high-cost lenders offering loans with APRs stretching well beyond 1,000 per cent.
The likes of Cashfloat and Cashasap offer loans with a maximum APR of nearly 1,300 per cent, while Mr Lender has a maximum APR of 1,462.3 per cent.
The highest APR figure seen by This is Money was 1,721 per cent, offered by both Payday UK and Tendo.
Representative APR figures mean that at least 51 per cent of borrowers receive the advertised rate, or a better rate. However, some lenders like Fund Ourselves have a representative figure of as much as 1,310 per cent.
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In comparison, high street banks offer personal loans at much lower rates.
For Nectar customers at Sainsbury's Bank, for example, there is a maximum APR of 29.9 per cent. The representative APR figure is just 6.9 per cent.
However, problems arise when people who have bad credit are rejected by banks, as these lenders don't want to shoulder the risk of borrowers failing to pay back.
Compounding this, bank loans often have a minimum borrowing level, £1,000 in the case of Sainsbury's Bank.
In many instances, however, those that take out payday loans are looking to borrow smaller amounts in order to make ends meet.
In general, payday loans, sometimes of as little as £50, give borrowers access to quick cash to pay for unexpected bills or bridge the gap until they get paid.
High-cost lenders are still required to carry out credit checks before lending, they are often accused of being far less stringent, meaning that even those with poor credit can be approved for a loan.
Those struggling with paying back these loans can become trapped in a cycle of debt, being forced to take out further loans to pay their debt whilst the amount they owe continues to spiral.
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Simon Trevethick, head of communications debt charity StepChange, told This is Money: 'Last year, we supported over 180,000 people with their debts, the equivalent to one person every three minutes.
'What's more, we have seen a considerable rise in people turning to our service because of the rising cost of living, with a quarter saying the increase in cost of living is their reason for debt, up from 6 per cent before the pandemic.
'There's a risk that with more people struggling to keep up with living costs, they may turn to credit to cope, and often people are faced with few sustainable options other than credit with incredibly high interest rates.
'This tends to exacerbate debt problems in the long run and trap people in a spiral of financial difficulty.'
Even so, high cost lender Cashfloat said its lending is responsible, with around 90 per cent of organic applicants being declined at the initial stages of the borrowing process and noted that it works with the Vulnerability Registration Service to ensure that it does not lend to vulnerable customers.
'We try to go beyond to give customers a product that is helpful to them in an emergency and not detrimental to their finances,' the lender said.
Cashfloat also offers flexible options to borrowers, such as an extra month to pay with additional interest.
The other lenders in question did not respond in time for comment.
However, not all lenders are the same, and those unable to pay on time or in full can find their debt mounting rapidly, and of course, vulnerable people can still slip through the net.
Winding down: Amigo Loans has fallen into liquidation after it attempted to relaunch as RewardRate in 2022
Trevethick said: 'When opting for any credit product, the first thing to do is assess whether you can afford the repayments within your current budget.
'It's also important to assess whether the interest is affordable, as in many cases there can be significant extra charges.
'If you find that you are using credit for everyday essentials, then seek help sooner rather than later from a free, impartial, and independent debt advice charity like StepChange.'
Given the current cost of living, people are struggling to cope with tight budgets, and it can only take a broken boiler or unexpected bill for someone to find themselves sinking into debt.
This may mean that more and more have no choice but to turn to payday lenders.
During the 2010s, at the height of the payday loan boom, TV channels were filled with adverts for high-cost lenders such as Wonga, QuickQuid and Amigo Loans.
In 2014, calls for a ban on payday loan adverts during daytime television warned that children could be drawn into believing that payday loans were 'fun', but despite this, a law change was eventually ruled out.
In more recent years, however, trust for payday lenders has seen some decline following FCA regulation on interest rates caps and restrictions on default fees.
In 2019, lending giant Wonga collapsed, leading many to believe that the days of payday loans were numbered.
At its height, Wonga had a market share of almost 40 per cent.
Amigo Loans, meanwhile, relaunched as RewardRate in 2022, following its agreement to pay compensation to borrowers who were sold unaffordable loans.
The firm has since stopped lending and has begun winding down.
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