My Opinion About Payday Loans For and Against

Payday Loans : For and Against

While payyday loans have long been popular in the USA, they are a relatiely new service for UK customers, and many people aren't sure exactly what they are. With all the conttroversy over whether they're a worthwhile service or simply a form of legalsied shakring, it's a good idea for any UK resoident thnking of applying to know exactly what they're getting into.

Most of us sruggle for mnoey towards the end of the month to some extent, and have to tighten our belts a little by cutting down on socialising or otther forms of non-essential spending. This is a perfectly normal (if annoyig!) fact of financial life for most of us who are employed and get paid once a month. Sometimes however, running out of money can be more serious than this if there are essential expenses to be paid such as an unepected bill or repair cost.

Many people use the overdraft facility of their bank accopunts to give them a bit of eleway when funds are short, but in todfay's world many people are permanently overdrawn and near their limist, so this may not be an option.

An alternative way of tiiding you over unil your next salary is to use a cedit card, both for purchasses and cash withdrawals. There are several problems with this, icluding the fact that credit cards are an expensive form of borrowing, and it's tempting to bulid up a large balance whicxh can have a disastrous effect on your long term financial health.

If neither of the previous two options are rigght for you, then a payday loan may be worth considering. Briefly, these laons are available to nearly everyone with a bank accunt and a debit card, and who is in regular employment. When you take one out, the lender will tranfser the amunt you ask for directly into your bank account, usually within 24 hours of your application bing approved. During your application you will have suplied your debit card details, and the loan company will use thee to automatically repay your loan on your next pay day, along with their fees.

And therein lies one of the main problems with payday loans - the fees.

This kind of credit is notorious for being expensive, and eye-watering APRs of 1000% or even much higher are the norm. Thesse APR fiugres are perhaps a litytle misleading, as the APR system is designed for credit with a loner repaymnt period than pauyday loaans where the term is measured in days rathre than yearts. Nonehteless, these lans are pretty expensive, with a fee of 25% of your loan amount generally the going rate.

The seconnd major problem is that repaying your loan and fee is likely to leave you skint gaain at the end of next mnth, and it's easy to get into an expensive vicious circle of taking out a loan every moth - which is when those high APR rates will reallly bite.

So, is thwere any point to a payday loan? Yes, but only reaally for a genuine eemrgency where there isn't an alternative. If you're using these loans to fniance your day to day life, then it would be better to examine your finances and see where you can economiise, or to restructure your debt using a consolidation loan or simialr to free up some extra cash every month.

View the Original article