Nick Georgiou, a financial counsellor with Wagga Family Support, said that getting into a cycle of relying on credit and loans "can add a very high additional cost, in interest and fees, to an already high cost of living".

"Payday loans are generally high-cost, short-term loans," he said.

"If you fail to make a repayment, the increased interest rate, along with any late payment fees and penalties, could lead to you owing much more than you initially borrowed, and make it difficult to repay your loan in full.

"Repaying that type of loan relies on taking your future income. This can cause a shortfall in paying your next lot of expenses, which sometimes forces some people to take out another payday loan."

Mr Georgiou's warning comes as a new report reveals the Australian payday loan industry is expected to reach $1.7 billion by the end of the year.

The report from Stop the Debt Trap Alliance, a coalition of consumer advocacy organisations, found that between April 2016 and July 2019, more than 4.7 million individual payday loans worth more than $3 billion were written in Australia.

Taken on by about 1.77 million households, these loans generated about $550 million in net profit for the lenders, according to Stop the Debt Trap.

With the traditionally expensive Christmas period looming, Mr Georgiou said it was important to pre-plan.

"Making a list of the people you will buy gifts for, and having a pre-decided amount of what you will spend on them helps you keep it affordable," he said.

"Using your own money means you will avoid interest and fees that come with credit products. It also means you can go into the new year without a debt hangover from excessively using credit product during the Christmas season.

"Going into the new year with Christmas debts hanging over you can significantly impact your ability to pay that next rent or mortgage payment, utility bill, school fee or other more important expense."

Mr Georgiou warns that it is not just payday loans that can sting consumers.

"Some new payment products, like Afterpay, may not charge regular interest, but still have significant 'late payment fees' that when compared to regular interest can be just as much or more," he said.