Expert: Payday loans are "legalised robbery"

An expert has warned against taking out payday loans.

Consumers must be wary of the long-term effects when opting to take out a payday loan, an expert has said.

The aftermath of the global economic downturn has seen the popularity of such personal loans grow as people struggle to make ends meet with just their current account.

However, according to Justin Modray of online resource Candid Money, relying on these short-term solutions is a risky game due to the huge interest rates attached to them.

Nevertheless, Mr Modray explained that Britons are deciding to turn a blind eye to the pitfalls in favour of boosting their account balance as quickly as possible, even though they involve "potentially horrific costs".

"Typical payday loans charge interest of around 2,000 per cent or more. This is nothing short of legalised robbery," he warned.

These comments came after the publication of research by Credit Action last week (June 30th), which established that personal interest of £178 million is paid every day in the UK.

By Mark Hornby