Payday loans should be carefully considered before a consumer takes one out as they can work out expensive.
A payday loan is meant to be short-term and the amount borrowed is usually paid back once the consumer gets their wages but if payments are deferred they can be costly.
According to Mark Lyonette, chief executive of the Association of British Credit Lenders, people should get advice from their banks or loan providers before borrowing money.
Alternatively, consumers could compare loans online in order to find the best deal for them, with the lowest amount of interest.
Mr Lyonette warned consumers not to fall into the trap of payday loans as they can seem attractive.
He said: "With flashy advertising and quick decisions a payday loan may seem attractive, but can end up being a very expensive choice in the end."
People who resort to this form of borrowing could end up paying an extra £20 on top of every £100 that they obtain. If this is then rolled over, it can cost a lot more as the interest accrues.
A £300 loan could end up costing the consumer £660 to repay in full over six months, he added.
According to Consumer Focus, the number of people that have borrowed money in this way has quadrupled in the last four years.
A total of 1.2 million people have taken one out since 2006 and borrowed a total of 1.2 billion.
The firm states that some of these loans can charge between 1,000 and 2,000 per cent interest, which could cause someone to get into even more financial difficulty.
It wants banks to offer short-term loans with favourable rates of interest to its customers in the future.
If this happens consumers could use the internet to compare each provider and find the best deal for their needs.
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