13/11/2012 09:52 GMT

Payday Loans: The Good And Bad Experiences Of Short-Term Debt

Payday loans companies charge high late payment fees, interest rates of around 4000% APR, and can push many people deeper into a spiral of debt which is why MPs such as Labour's Stella Creasy are calling on the government to regulate companies like

In new research published by insolvency practitioners R3, five million British adults said they would consider taking out a payday loan in the next six months, an increase from 3.5m while 13% said they went without essentials like food and heating in order to pay debts.

Russell Hamblin-Boone, Chief Executive of the Consumer Finance Association which represents loan finance companies, told the BBC Radio 4 Today programme that only 6% of the people borrowing money from payday loan companies were in "financial difficulties."

money shop

Some customers have reported good experiences taking a payday loan - if careful

He said: "The majority of payday customers pay off their loans in full and on time."

Is there a way to make the payday loan companies work in your favour? HuffPost UK's readers have shared some of their experiences, and claim the companies can even be played at their own game.

HuffPost UK reader Martin Harkins, 27, from Falkirk, used Wonga to make a profit of £50 through referral fees.

He told The Huffington Post UK: "I have had several positive experiences with payday loans.

"I made a profit, and my partner did it too. I take a small £10 loan over one day, using a cash-back site.

The interest is six pence a day, for every day you have it. So then I pay it back straight away as new customers don't pay transmission fee.

"You get a £20 referral fee if you get partners and mates to use it, and you get cashback of £15 for free. Then you never use it again.

"I first heard about using that system off a article that Martin Lewis did last year on his website [Money Saving Expert].

"I made a nice free £50 for only 12p cost. I really do think that it's a way of playing them at their own game. Doesn't take much restraint in not using their service again."


Payday Loans: Familes Going Without Food To Pay Debts, R3 Research Says

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Reader Derek Wood told HuffPostUK he had "used Wonga a few times and not had a problem. I use them for small loans a few days before payday.

"As I see it, as long as everything's upfront and nothing hidden I don't have a problem. And as long as it's a small amount (no more than £100) then you're hardly paying back a fortune.

"Bottom line is don't borrow what you can't repay as soon as you're paid."

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Another reader on HuffPost UK's Facebook, Esther Munkley, posted: "At one point I had no choice but to use this kind of loan, you only use these if you have no other choice - if you don't have the money to cover the payment you just cash another cheque - not a great cycle to be in but I managed to get out of it with no major drama.

But she added: "I think you are crazy to use unless like me you really have zero choice. Doing it to buy shoes or pressies or something is just silly.

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Graduate Penny Gordon, 25, told HuffPost UK she had been caught out by enormous charges when her payment to Wonga bounced after changing her card - and she had not realised.

"I got a payday loan from Wonga about two years ago, coming to the end of my student days and just needed a couple of hundred quid to tide me over. I was due to pay back, approx £260.

"You give them your bank card details so they can take a debit card payment when you're due to pay it back. I moved out of the student property my loan was attached to and being a bit irresponsible didn't tell them my change of address, then I lost the debit card, got a new one, so the details changed. So my repayment didn't go through.

"And I didn't get the letters. But then, less two months after I took the original loan. I got a letter - I owed over £800.

"It was a huge shock, of course. So I called up panicking and they were rotten - really unhelpful, actually laughing at me. I was quite distressed. And letters started arriving at my parents house.

"My dad called them up, paid what I would have owed originally, £260, and said they weren't getting anymore. And they kept sending letters for the remainder for a few weeks, but it eventually stopped."