Pay day loans taken out by 1.2 million each year despite high rates of interest

Over a million people are taking out pay day loans each year to cover costs for a short term period despite being charged a huge annual interest rate by lenders. Customers taking out a loan of £100 for a week could pay as much as £120 back - an interest rate of 1,000 per cent. According to figures revealed by watchdog Consumer Focus, some companies charge a whopping annual interest rate of over 2,500 per cent. However, the quick-fix nature of the facility has meant that four times as many people have taken up the service since 1996 and some customers, who pay back their loan the next day, could find it cheaper than using an unauthorised overdraft option.