Vulnerable people in Norwich are getting trapped in spirals of debt because they have become dependent on short-term loans, according to worried campaigners.

The fear has prompted Norwich City Council to back a national campaign which calls for caps on the cost of credit, so people do not end up crippled by debts through taking out what are dubbed payday loans.

And families are being urged to seek help from credit unions rather than from online and High Street lenders, some of whom charge up to 4,000pc in annual interest rates on the loans.

Unlike illegal loan sharks, these companies are not doing anything unlawful, but there is concern that they are all too willing to lend money to people who will not be able to pay it back - and people who do not pay find the charges steeply increase.

The city council has drawn up maps of Norwich detailing the correlation between council tenants who are in rent arrears and those who are unable to get access to credit from banks.

They fear those families are getting bogged down in debts when they turn to payday loans from lending companies - or to actual illegal loan sharks.

Alan Waters, cabinet member for resources, performance and shared services, said: 'This industry is walking away with big profits, but it is society which is left to pick up the pieces.

'We want to engage with the companies, with banks and with credit unions over this. Times are going to be even tougher for a lot of people and we need to make sure people are clear what they might be getting themselves into and what alternatives there are.'

Marion Maxwell, from St Benedicts Street, who will be running for Labour in Mancroft ward in May's city council elections, said she realised the root of the problem while out campaigning.

She said: 'I was asking people what is really worrying them and the answer I got time and time again was the loans people are taking out. 'I heard some terrible stories of people who have borrowed money without fully realising that they would be paying over 4,000pc APR in interest.

'These aren't people who are getting loans for luxuries. These are people who are having to borrow money just to get by.'

One Norwich man, who wanted to remain anonymous, said he took out a �1,000 loan to get his car through its MOT and now fears he is going to be dragged through the courts, even though he had been paying the money back.

He said: 'We were paying back about �50 a week to one of the High Street companies through the bank, no problem at all. But then a man came to the house saying would we switch to door to door collections?

'We said yes and arranged a day and a time for him to come, but since then we have not seen him once. Then we got a letter saying we were in arrears. I've tried ringing up to sort it out but nobody answers. It's worrying now because they are threatening court.

'My neighbour has had the same problem. I think they are deliberately not collecting it so people get into more bother. They are definitely targeting the people who are less well-off.'

Ms Maxwell wants lenders to offer more information about managing money and credit unions - which are financial co-operatives, owned and controlled by the community and mostly run by volunteers.

Members pool their savings together which then provide funds from which loans can be made, with interest charges lower than many other sources of credit.

John Brewer, treasurer for the Norwich Credit Union, said: 'The reasons people come to us varies a lot. Some come so they can make home improvements, while others might need money for a new fridge or freezer, to buy a second-hand car or to pay off an existing debt they have.'

Loans are available to members who have saved regularly for 13 weeks, normally up to three times the amount of savings, repayable over an agreed period.

Mr Brewer said: 'Our interest rates are regulated by law and we only charge 1pc a month on the unpaid balance which is about 12pc a year in APR, yet when you look at some of the adverts for the other companies it can be up to 4,000pc a year. We are a safe alternative.'

One of the online pay-day loans companies defended his company's approach over the weekend. Errol Damelin, chief executive of Wonga, told a national newspaper it was made clear to customers that his business only lends short-term money and interest is only 1pc a day if they stuck to the one-off repayment plan. He said: 'We are aimed at the Facebook generation that needs 24/7 access and they are willing to pay for the convenience.'

Norwich North MP Chloe Smith has been working with the Norwich and West Norfolk Citizens Advice Bureau to find ways to get people more clued up on financial management.

For information on debt advice call the Norwich and West Norfolk Citizens Advice Bureau on 0844 499 4104 or visit www.norwichcab.org.uk

• Do you want to share your story with our readers about how debts have ruined your life? Call Evening News reporter Dan Grimmer on 01603 772375 or email dan.grimmer@archant.co.uk