Don’t get caught in the Payday Loan trap
We’re being bombarded with adverts for ‘Payday Loans’. Advertised all over the press, TV and online, they are the fastest growing form of borrowing in the UK for the 3.5million people struggling to make ends meet. Its quick cash and it’s readily available even if you have a poor credit rating.
Many people are taking up short term loans that can get out of control and trap them in a circle of debt. After you take out that first loan, many lenders will keep offering you more money, making it easy and very tempting, so it’s hard to say no. The Payday companies will take the money straight from your bank account when it’s due (whether you can afford it or not), so it’s easy to see how it can get you further into debt when you have to borrow more to get out of trouble. 1 in 3 people that take out a Payday Loan end up more in debt and the interest rates are as high as 1000%.
Be money wise
If you’re thinking of taking out a Payday Loan, consider:
Why do you need one? – If it’s to pay bills or your income isn’t lasting till you get paid then you probably need long term help and advice on budgeting. A payday loan could make things worse for you.
If it’s for a one off emergency – can you afford the repayments? The cost of the loan could push you further into debt.
Having a ‘rainy day’ fund – Even spare change can add up to quite a bit when you are low on cash. Put some money aside for those extras that come up from time to time.
The alternatives – If you’re borrowing to pay bills, speak to the supplier or the people you owe money to instead. They may be able to help by putting off a payment or making an arrangement you can afford to help you catch up. You could also join a credit union. They help you save a little every month and if you are a member, they can help with a loan, offer interest rates that are affordable and they won’t encourage you to get further into debt with more offers. Visit wwwfindyourcreditunion.co.uk for more information.
Quids In Magazine’s Payday Loan Do’s and Don’ts
Do…
..Get help as soon as you realise you have a problem. Talk to one of the agencies offering free advice such as the Money Advice Service, National Debtline or StepChange. Private debt management companies will charge you for their help and just create extra debt for you in the long term.
..Try and save a little each month even if you have debt. Be realistic about what you can afford to pay off.
..Understand AER or Annual Equivalent Rate). This represents the charges and the interest that you would pay on top of what you borrow if it took a year to pay the loan back. The more you borrow, the more interest and charges you have to pay. If you can, pay off debts with a high AER or interest rate first. Move your debt around to get cheaper rates so when you pay, you are reducing the debt.
Don’t..
..Borrow money from an unlicensed lender. They offer cash in your hand and no paperwork but this means they can ask you to pay whatever they want later on. See also Loan Sharks
..Stick your head in the sand. Face up to your debts and get free help to sort out your finances. You’ll feel better and back in control
..Be scared to ask for help as soon as you know you are struggling
..Borrow for anything you don’t absolutely need unless you are sure you can repay it.
For more helpful information on Payday Loans, download the Quids In leaflet
*Source – Quids In Magazine www.quidsinmagazine.com
