A consumer watchdog has revealed new research that suggests 1.2 million people have taken out a payday loan as a solution to a temporary shortfall in the cash that they need.

Compared with 14 years ago, Consumer Focus has said that the number of people taking out payday loans is four times more. Potential reasons for this increase include how these financial solutions are more readily available now than they ever have been because of the Internet.

Annual revenue at the moment outlines how payday loan lenders are lending £1.2 billion to their consumers – suggesting that on average, a consumer will take out £1,000 to repay when they receive the money from their employer. Of course, this does not account for those who take out more than one payday loan over an annual period.

The abundance of information which is available on different credit solutions is making consumers far savvier with the decisions that they make. Some people are recommended to take payday loans out instead of relying on a bank overdraft or a credit card, because of how the fees can be a lot more expensive to pay when brought in contrast with payday loans.

Research has also shown that consumers are more inclined towards payday loans because of the clear and concise information about the interest rates that they will be paying on money borrowed. Because of the intricate small print seen on credit card agreements and with bank accounts, the prospect of costly surcharges has deterred some consumers from pursuing other options.

Meanwhile, the companies which are providing these services have welcomed the statistics – reiterating how consumers can experience less risk and more security through using this option when brought into contrast with a loan shark. Loan sharks are unregulated and can use questionable means to request repayment should it not be met on the agreed date. On the other hand, many payday loan lenders have procedures in place for those who miss the due date for outstanding balances to be settled.

In addition, consumers are now thinking more carefully about the money they lend, by going for more immediate solutions which span shorter lengths of time. With escalating unemployment meaning that some people are uncertain about job security, some people see a more substantial secured or unsecured loan as a risk because of how a person’s financial situation can shift unpredictably.

The demand for payday loans has meant that there are plenty of lenders out there, vying for the custom of those who need credit quickly. However, there is no generic interest rate that these businesses are levying – with 18% to 30% being added to each £100 borrowed. This substantial divide between the lowest and highest rates on the markets has meant that Consumer Focus is encouraging those who want short-term credit to explore the most viable options available to them.