Payplan said that payday loans have seen a significant rise in popularity during the recession but, despite being marketed as a quick way of tiding over people short of money until the end of the month, have very high interest rates that could push borrowers into further debt.

John Fairhurst, managing director of consumer debt solution provider Payplan, said that clients approaching financial advisers to get payday loans are much more likely to need debt advice and budget planning.

Fairhurst said: “A payday loan might appear to provide a quick and straightforward solution, but we often see people drawn into repeatedly taking out these expensive loans to try and keep up with unaffordable repayments to other creditors. Instead of improving their situation, people often find that use of these loans exacerbates an already serious debt problem.”

He said that payday loans offer credit of up to £750 online or through the high street and, while interest rates differ from one loan company to another, people will pay on average £25 interest for every £100 borrowed.

Fairhurst said: “I would strongly urge advisers to be careful dealing with clients who are looking for a quick fix to debt problems. At best, payday loans might seem to offer some cashflow advantages, but advisers need to understand that requests for payday loans can, in many cases, hide an underlying debt problem where the best counsel they can give clients is to seek impartial debt advice rather than borrowing more money.”

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