Britons seeking payday loans in December soars

The number of Britons taking short- term payday loans surged in December as people borrowed to pay for Christmas gifts, said Ferratum, a lender of microloans.

More than four times as many people applied for a payday loan in the last two weeks than in the whole of November, the company said in an emailed statement. Payday loans, or paycheck advance, are small, short-term and high-interest loans intended to cover the borrower’s expenses until their next payday. Ferratum offers loans between 50 pounds ($78) and 300 pounds, repayable within a maximum of 45 days.

“The level of applications has been phenomenal during December and particularly in the past two weeks,” said Ian Porter, Ferratum’s U.K. sales and marketing director. “We have received four times’ as many applications for microloans in that period alone than in the whole of November.”

Pawnbrokers such as Albemarle & Bond Plc, H&T Group Plc and Cash Converters International Ltd. also offer short-term loans. All three companies have reported profit this year that beat analysts’ estimates as the U.K. economy slowed, unemployment rose and banks applied stricter lending criteria.

Ferratum said the industry forecasts the number of Britons applying for payday loans next year will rise to 3.5 million people from 2 million this year.

On a 30-day loan of 100 pounds Ferratum charges a representative annual percentage rate of 3,113 percent so that the total repayable after 30 days would be 133 pounds, according to its website. Most applicants are aged 18 to 35 and more than 60 percent are women, said the company.

The Office of Fair Trading estimates the number of payday borrowers increased fourfold to 1.2 million between 2006 and 2009, spokesman Adrian Ient said.