Startling researched has revealed that 92% of UK payday loan borrowers don’t own their own homes. Is this due to high rental costs? Is this due to the difficulty this generation faces in getting on to the property ladder? Are tenants really struggling to pay the rent to the extent that they need to take short term loans?


According to research carried out by Readies, the vast majority of borrowers don’t own their own home. Analysis of the results revealed that:

  • 8% of UK payday loan borrowers are homeowners
  • 60% are tenants; 72% of these are council tenants
  • 32% live with family or friends, although many of these will be making some small contribution towards the rent.

This correlates with the statistics released by the Citizen’s Advice Bureau. The average payday loan borrowers are tenants in either private rented accommodation, housing associations or council tenants. But why is it that so many tenants feel the need to take payday loans? To answer this, we need to look at some of the realities of being a tenant on a low wage in the UK.

Payday Loans Net is a responsible direct payday loans lender who genuinely cares about their clients. When we discovered this research, we had to look into it further to better understand our applicants. Understanding why people need payday loans is essential if we want to provide the very best loan product to suit their needs. So, in this article, we look at the 60% of payday loan borrowers who are tenants, and try to understand why these people in particular are finding it so hard to make ends meet.

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Affordable Housing

It’s a universal rule: as demand increases, the price increases. This applies equally in the area of private renting. The rent varies from location to location. and it’s easy to say that people with a lower income should just live in cheaper areas. However, this doesn’t always work out. When choosing where to live, proximity to work, schools, and sometimes family or friends, is a vital factor. It’s often impractical to live in cheaper areas. Tenants end up paying more for smaller properties in more premium locations. Many low-earners are finding that the high rental costs eat up most of their salary. They find themselves unable to cope with any extra expenses.

Research from YouGov and Shelter shows that a full 70% of private tenants are either struggling with or falling behind on their rent. In fact, more than half of low-earning private tenants have had to borrow, fall behind on bills, or take out money from their savings to pay the rent. This is not sustainable! Eventually, the savings will run out and the debt collectors will come knocking, and then what will they do?


High Rental Costs

Anne Baxendale, director of communications, policy and campaigns at the housing charity Shelter feels strongly about this:

It just isn’t right that so many hard-working private renters are having to take on desperate or dangerous debts just to keep a roof over their heads. No family should have to choose between relying on their credit card to keep up with the high rental costs or moving miles away from their jobs and schools to find a home they can actually afford.

A shocking estimated 800,000 tenants find themselves unable to save even the minimal sum of £10 a month. With statistics like these, it is no wonder that so many tenants are falling back on payday loans UK. If they are unable to save towards an emergency fund, where can they turn when they suddenly need a sum of money?


Moving House

In a case study presented by housing charity Shelter, Tracy, a mum of three, describes how she has been forced to keep moving to a new house, downsizing each time, to be able to afford the rent. Her eldest son is seven years old, and has lived in six different houses. She usually ends up borrowing from her retired mother to cover the rent.

This may be more of an extreme example, but the fact remains; people renting generally move to a new house much more often than those who own. Moving to a new house is very expensive, between the boxes, paying the movers, costs of buying new furniture or any redecorating that needs doing. Even that pizza that you inevitably order at some point over the move adds to the expenses that pile up. Packing up the house will often take days, and if you work full time you may have to hire expensive packers to do the job. You may also need to pay for extra childcare if you have children who need to be out of the house during the move.


All in all, moving is a very expensive endeavour. Being forced to do so every year or two because you can no longer afford the high rental costs of your current place can have a strong negative impact on your finances. Many tenants are forced to borrow money to cover the costs of the move.

Security Deposit

To top it off, when moving to a new place, the landlord will often demand a deposit upfront. This is usually between half a month and two months’ worth of rent, and it comes on top of the rent expected for the first month. If you are getting back your security deposit from your previous property, it will usually cover most if not all of it. However, there may be a difference in amounts, or you may not receive the whole deposit back (if something was damaged, for instance) or there may be a delay. In this case, you may be pressured to consider a direct lender payday loan to cover the cost of the deposit until the payment for the last one comes through.

Houses for Sale


Rising property prices have cut off many of the younger generation from starting to climb the property ladder. House prices in London average at around half a million pounds. Due to this, even some higher earners are struggling to afford the 20% deposit required.

While they are saving, they still need to pay rent. As discussed earlier in this article, high rental costs often eat up such a large proportion of salary that many private tenants are struggling to save anything at all.


So, who can afford a home? In general, it will be people who have been saving for years, are on a much higher income and/or have parents or other family members who can provide financial support. These people tend to have more financial stability than tenants. Moreover, homeowners often have a wider range of credit options available to them than just payday loans. This can all shed some light on why so few homeowners have turned to payday loans compared to tenants and those living with family or friends, according to the research by Readies.

Private Tenants: The Good News

Yes, rent is high – but it has recently been dropping. Experts believe this to be a combination of Brexit, the poor sales market, and an increased supply due to the buying frenzy before the hike in stamp duty last year. Either way, the facts remain: rents have been decreasing in the last few months, with the sharpest falls taking place in London. In May 2016, the average London rent was £1,572 a month, but by May 2017, it had fallen to £1,502. That extra £70 a month is a huge bonus to tenants, who are benefitting greatly from this drop.

But is this enough to save private tenants from payday loans? Is this merely a temporary relief from high rental costs, or is it perhaps a sign of a better future? Only time will tell.


PUBLISHED BY
Chloe Winters
Chloe grew up in the countryside, but came to the city to pursue a career in economics. She fell in love with the abundance of shops, and quickly developed a passion for fashion. After blowing her first salary on a shopping spree, she realised that budgeting is the only way to go. Now, Chloe is a budgeting queen – and still manages to dress like a superstar. She loves sharing the advice and tips she gained along the way, and is excited to be part of the Payday Loans Net blogging team. Her advice to you: If I can do it, anyone can!

The article "High Rental Costs Drive Low Earners to Payday Loans" was last modified on