You are here: Home - Credit Cards & Loans - News -

Students increasingly turning to payday loans

Written by: Emma Lunn
The number of students using payday loans to get by at university has risen by 136 per cent in the past 10 years, according to MoneySupermarket.

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.”

Read more  about guarantor loans here.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week