Students increasingly turning to payday loans
A third of students (31 per cent) have spent their entire maintenance loan by week five of a typical 16-week term, and are relying on other borrowing to survive, according to the price comparison site.
It found that more than a quarter (26 per cent) of current students have used payday loans while more than a third (36 per cent) have borrowed money on a credit card.
The figures are in stark contrast to 10 years ago when only a tenth (11 per cent) of students used payday loans whilst at university, and 26 per cent relied on a credit card.
MoneySupermarket found that a third (33 per cent) of students choose not to tell their parents about additional loans they take out while at university, with a quarter (27 per cent) having a ‘secret’ credit card, up from 15 per cent a decade ago.
Today’s undergraduates are also more likely to have a second covert current account (22 per cent vs14 per cent), personal loan (23 per cent vs 11 per cent) or undisclosed second overdraft (20 per cent vs 13 per cent) than students 10 years ago.
MoneySupermarket also examined how students spend their maintenance loan. It found half (50 per cent) of current students are likely to spend it on a gym membership or health or fitness classes. Under half (48 per cent) spend their loan on alcohol, compared to 62 per cent a decade ago.
Emma Craig, money spokesperson at MoneySuperMarket, said: “Our research reveals that over a quarter of students are having to rely on payday loans – up by over double in the last decade.
“There could be a number of reasons for this, including the rising cost of living, increased tuition fees and more expensive household goods. A third of students today also aren’t able to make their maintenance loan last longer than five weeks, so it’s not too surprising to see that borrowing has increased. However, payday loans are rarely the most cost efficient way to borrow and should be a last resort.
“If you’re a student heading off to university this month, now is definitely a good time to think about how you’re going to manage your finances. Creating a budget is a great place to start and will help you work out how much you have to spend each week. If you think you may need to borrow money at some point, taking out a student current account with an interest free overdraft can be a good option. Before you decide which bank to go with, make sure you shop around to ensure you’re choosing the current account that’s best for you, particularly in the long run.”
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