Payday loans are
quickly becoming one of the most popular products across the world. However, as
the amount of borrowing is highlighting the spiral of debt that people are
falling into, will a payday loan really help? In the current economic climate,
banks are getting increasingly tighter on lending and as the global growth
outlook continues to look bleak, bank lending looks set to shrink further. With
this said for people who need access to cash but are constantly getting turned
away from their banks, or people who need money fast for an emergency, what are
their options? Consumers are increasingly seeking alternative sources of
finance, such as payday loans.
A payday loan is an
unsecured short term loan with the general idea being you borrow a small amount
of money that you pay back, plus interest when you next pay cheque comes
through or on your next 'payday' hence the name. They are quickly becoming one
of the most popular products on the market because you can get access to fast
cash when you need it, often on the same day. Some lenders can even get the
money to you in under an hour. There are also minimal credit checks involved
and you are likely to get approved for a loan whatever your credit rating. For
many, payday loans are seen as a simple solution to a debt crisis. But, how far
is this the case?
There is much
discussion about the payday loan industry. These loan companies have been
heavily criticised about the way they treat individuals that get into financial
trouble and for transparency in their advertising. Most recently, payday loan
lenders have been blamed by many debt management companies and consumer groups
for escalating debt problems. The interest rates on payday loans are very high
compared to other types of loans and the charges will simply mount up if you
cannot pay the loan. If you miss payments the lenders can agree to roll over
the loan but you will still be paying the interest on every month you don't
repay what you owe. This can make the loan completely not worth it and if you
are already in debt then you risk falling into further debt because charges
mount up. With a payday loan you also risk damaging your credit score which can
affect you in the future when applying for financial products. Payday loans
shouldn't be used regularly as they are expensive and they should never be used
to solve any long term financial difficulties you might have.
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