Savers 'should consider other options before payday loans'

An expert has said that people should look into other sources of finance before taking out a short-term personal loan.

Anyone considering taking out a short-term personal loan in order to boost their current account balance should first carefully look into other options open to them prior to making a final decision, an expert has said.

Payday loans are becoming increasingly popular in Britain among people short of cash but not wanting to spend more from other sources such as their credit card or savings account.

But Mark Lyonette, chief executive of the Association of British Credit Unions has urged consumers to avoid them if possible as they are "expensive options".

"Before looking at a payday loan, people should contact their local credit union or talk to their existing bank to see how they can help," he said.

Mr Lyonette's comments came after the publication of data from Consumer Focus last week (August 14th) which showed that the number of people taking out this type of loan has gone up by around 400 per cent over the last four years.

By Kate Guthrie