The figures come from a survey published today by Shelter, the housing and homeless charity.
According to Shelter, the high number of people borrowing money through payday loans suggest that many are struggling to keep a roof over their heads.
The report found 2% of Britons have taken out risky payday loans, equating to one million people nationally.
Campbell Robb, chief executive of Shelter, said: "These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home."
It also found that one in seven Britons, around seven million nationally, have resorted to other forms of credit and high interest borrowing to keep up with mortgage repayments or rent.
The difficult economic climate and increase in inflation has significantly reduced household income over the last year and has been blamed for struggling families resorting to risky financial borrowing.
Financial advisers have warned that payday 'loan sharks' - which in some cases charge up to 4000 % in interest - are cashing in on the millions struggling with their finances who are often unable to borrow from mainstream lenders.
Payday loans, also known as 'instant cash' loans, can seem appealing but as Shelter warned, they should only be used as temporary fix and not a long-term solution. As well as the high APRs, payday loans often charge high penalty fees if loan payments are missed.
Robb continued: "Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness."
John Lamidey, chief executive of the Consumer Finance Association, said it would be "simply impossible" for someone to use payday loans to pay off their rent or mortgage.
He said: "They are loans for a short period of time, typically a month. If somebody applies for a loan and it was discovered they are in arrears with a mortgage we would not lend and we would steer them to the debt advice agencies."
Shelter is urging anyone who is relying on on credit to help pay their rent or mortgage to urgently seek financial advice.