Pressure on households to overspend this Christmas is increasingly making Londoners resort to payday loans to cover the costs of the festive period.
Payday loans in London are set to increase by 133 per cent as households struggle to cover the costs of the holidays, according to the findings of a survey that pan-European credit manager Lowell shared exclusively with City A.M.
They also take out more standard loans and make more use of Christmas pre-purchase schemes, such as items from Christmas catalogues that are paid off in monthly instalments.
When asked how households funded Christmas 2019 and how this compares to Christmas 2020 we see that payday loans will increase 133%, loans to increase 87%, whilst disposable income is set to decrease 9%.
When asked how households funded Christmas in 2019 compared to the festive period this year, as set out in the table below, Lowell also found that nearly one in 10 Londoners borrow money from friends or family.
|Funding option this Christmas||% difference from 2019 to 2020|
|Christmas pre-purchase schemes||67%|
|Borrowing from friends or family||9%|
The findings come despite nearly a quarter of London households indicating that they plan to cut back their spending during the Christmas period, while 40 per cent will feel financial pressure, more than any other region in the UK.
The firm also found that 24 per cent of Londoners are set to reduce their spending, the highest proportion of any UK region, followed by 23% of Bristol households and 20% in Sheffield. Below the per percentage of UK households per region who are set to decrease spending this Christmas:
|Area||% of respondents|
Moreover, 66 per cent of Londoners feel pressure to overspend at Christmas, and 70 per cent feel pressure to overspend on food.
“Whilst many London households intend to reduce their spending this year, worryingly, there is an increase of people intending to use payday loans or other methods of credit to fund Christmas. This can lead to debt that can mount beyond control,” said John Pears, UK managing director at Lowell.