Winter lifeline off fered by payday loans but spiralling debts area serious issue Jeremy Gates looks at the nations money issues and investigates whether payday loans are a boon or blight

Winter lifeline off fered by payday loans - but spiralling debts area serious issue; Jeremy Gates looks at the nation's money issues and investigates whether payday loans are a boon or blight. Byline: Jeremy Gates    IN THE weeks either side of Christmas, hundreds of thousands of  households are expected to use a short term solution of 'payday  loans' to keep afloat - even though they could cause serious  problems in 2012. That is the warning from many financial advisors, as leading retailers predict family finances will be stretched as never before by  the festive celebrations. Supermarket chain Morrisons says a third of its customers already have no disposable income disposable income   Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also left at the end of the month, and that's  before this winter's massive fuel bills kick in. So it is hardly surprising more people are taking out payday loans to tide themselves over until their monthly pay cheque hits their bank  account. Loans to consumers in this "high-cost credit sector" could already top pounds 9bn. Ferratum, the self-styled largest online microloan mi·cro·loan   n.  A very small, often short-term loan made to an impoverished entrepreneur, as in an underdeveloped country. lender in Europe which launched in Britain in July, thinks more than two million UK  households already hold payday loans. Ian Porter, Ferratum UK sales and marketing manager says: "Microloans are probably the fastest growth area in the financial  services The examples and perspective in this article or section may not represent a worldwide view of the subject.  Please [improve this article] or discuss the issue on the talk page.  sector.     "People like the flexibility. They borrow pounds 50-pounds 300 to repay within a maximum 45 days. Consumers are increasingly turning away from long-term loans with traditional lenders."     By limiting first timers to a maximum pounds 100 loan, Ferratum  claims the risks are carefully controlled. Customers - applying online  or by a mobile - are told upfront the full cost of their loan, with no  hidden charges.     Customers can use an online loan calculator to work out the amount  they need, the repayment period - up to a maximum of 45 days - and total  cost.     Only then do they apply for a loan, after which Ferratum's  customer services team runs a credit check before advising in minutes  whether the application is successful.     It looks easy, and sounds simple. That's the problem.     Steve Rees at debt consultant Vincent Bond says: "This is a  valid service to provide short-term loans, but we are seeing people in  serious trouble with 10-12 of these short term loans, each one between  pounds 300 and pounds 400. "If you walk into a high street shop with a payslip payslip Noun   a note given to an employee stating his or her salary or wage and detailing the deductions   Noun 1. payslip  and some  identification, you usually get your money - and you can cross the road  to repeat the process three or four times.     "Once your debts pass pounds 2,000 or so, and you can't  pay back, interest rates become crippling."     As the current issue of Moneywise magazine explains, payday loans  are a highly controversial topic: with quoted interest rates on loans  from 450% to 4,214%, there are widespread fears that payday loans are  too complex for many people to handle.     These astronomic interest rates usually arise because they are  measured over a full year, when most payday loans last for only a few  weeks.     Steve Perry wrote a book, When Payday Loans Go Wrong, to detail the  saga which started when he took a loan for pounds 250 to pay for a  holiday in June 2009. Trying to avoid trouble in making repayments, he collected 64 payday loans from 12 companies - owing, at one point, a  total of pounds 22,000. "If payday loans are used for days to borrow a small amount, they could be a very useful form of credit," he says. A pounds 150 loan from Wonga, for example, costs pounds 177 if repaid in a fortnight - an interest rate of 18%. It's cheaper than putting the money on an unauthorised overdraft. But Perry found when clients hit trouble, many firms suggest further loans to cover ballooning repayments. It's a devastating dev·as·tate   tr.v. dev·as·tat·ed, dev·as·tat·ing, dev·as·tates  1. To lay waste; destroy. 2. To overwhelm; confound; stun: was devastated by the rude remark. trick. Walthamstow MP Stella Creasy crease   n.  1.  A line made by pressing, folding, or wrinkling. 2. Sports  a.  A rectangular area marked off in front of the goal in hockey and lacrosse. b. claims some payday loan A payday loan or paycheck advance is a small, short-term loan that is intended to cover a borrower's ex  Find out more on  same day loans