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Should interest rates on payday loans be capped?

CASH-strapped families who turn to online lenders to find a quick-fix to their financial woes have been warned they could quickly become embroiled in a cycle of debt because of extortionate interest rates.

A credit exper has warned that a £200 short-term loan could quickly rocket to up to £8,000 with interest rates as high as a staggering 4,000 per cent.

Citizens’ Advice Bureau (CAB) chiefs have expressed concern at the growing number of “payday loan” lenders offering cash-strapped residents a quick-fix.

But with interest rates for some lenders ranging between 3,000 and 4,000 per cent, the amount owed can quickly escalate if the period of the loan is extended.

Today we ask, Should interest rates on payday loans be capped?