Payday loans are definitely a quick way to get cash but there is much controversy surrounding these short term loans and many people choose to avoid them at all costs. There is definitely pros and cons around the many payday lenders that offer quick cash. Let’s take a look at the cold hard facts about payday loans, so that you can make the decision about whether this kind of lending is right for you or not.
1. If you apply for a payday loan, you will get the decision as to whether you have been accepted or not, in mere minutes. You will also get the funds deposited into your bank account almost immediately. This are definitely facts that are appealing to many would-be lenders, as your standard bank loan takes a while to go through and usually requires a ton of paperwork.
2. The interest rates of payday loans can seem RIDICULOUSLY high and this is the reason why many people warn against them, but there are some things that you need to remember. The interest rates (or APR) for these loans are shown over a yearly period. In retrospect, you will be paying back the loan after a maximum of one month, so the interest rate will only be a fraction of what you are being shown in the small print. Let’s say that you are borrowing £100 for 4 works, most payday lenders will require you to pay back around £125 – which isn’t bad at all!
3. There are over 240 payday loan companies in the UK alone, including those that are located in pawn shops. This is a crazy number and ensures that you have lots of companies to choose from, if you do decide to get quick cash loans. Some of these payday lenders are obviously more trusted and offer better interest rates than others, so it’s important to do your research including checking out reviews from real customers.
4. Payday loans are regulated from the Office of Fair Trading (OFT) just like all other loans. They have a credit license and are legally obligated to deal in a responsible and honest manner when giving out money to the general public.
5. Some borrowers can not afford to pay their loan back on time and need to take out another one. This can turn into a never ending spiral, which the amount of money being owed back getting larger every time. It is so important when you take out a payday loan that you understand this is a temporary solution to your financial struggles. If you cannot afford to pay back this loan on time, then it’s probably best that you don’t apply in the first place and look at the other lending options available to you.
6. Studies by the OFT have shown that the most common borrower are younger single men, who live in rented accommodation. Although this is the case and despite popular stereotype, there are a whole variety of people who decide to take out payday loans. Married couples with unexpected bills and people who want to avoid overdraft fees and decide that a quick cash loan is a better option for example. The companies are not there to judge you, after all – we all need a little help from time to time.
7. Although payday lenders would prefer it is you were employed, most companies will consider almost anyone as long as they have substantial incomings to pay back the loan on time. You might be shying away from this type of lending because you think you will not get approved, but there’s only one way to find out.
8. It’s important that you know that payday loans might damage your credit rating, even though some companies claim to the contrary. If you have taken out quick cash loans, it will show on your file for a certain number of years and might not work in your favour. Research has shown that some mortgage lenders are very wary when it comes to lending to people who have taken out payday loans, even if these were paid back on time.
9. The legitimate payday loan companies that exist out there are easy to deal with and will do their best to come up with a manageable solution if you cannot pay back the money on time (although you should still do your best to avoid this!) Some rogue companies that existed out there in the past, have definitely given a bad name to the more respectable companies who offer paydya loans. It is a fact that over half of the people who have a payday loan, will take out another one at some point in their life. If they were so difficult to deal with or unreasonable in any way, this would definitely not be the case.
10. The payday loan industry is rapidly growing, as is the number of people who are finding themselves in debt. Over 8 million payday loans are reportedly taken out of a yearly basis and the industry itself is worth £2.2 billion. Whether people are finding themselves in debt because of payday loans is something that hasn’t been proven but something that is constantly debated. Mant people actually hail the quick loans for helping them to get out of debt and back on the right track. They are not miracle workers by any means, but they can get you out of a difficult spot be offering quick and easy cash.
As you can see, there is a lot that you should be aware of in regards to short term loans and the payday loan industry in the UK on the whole, before you consider this kind of lender. They have a purpose and benefits, as long as you are using it for the right reasons of course. If you are in need of cash and have no other way of getting it, a payday loan could be exactly what you are looking for. Ensuring that you use a legitimate company for your loan and paying back on time, is really important in setting up a good relationship with the lender.
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