Payday Loans – The Truth
When you are short on cash and your next payday is still a long way away, finding some extra cash can be a struggle. Whether you need money because of an unexpected expense, an emergency, or even just too many bills to be paid or things that have to be bought within a given week or month, finding even a small amount of cash can be difficult. For many in that situation, payday loans may seem like a fast and easy fix. But if you know the truth about payday loans, you’d know that that isn’t the case at all.
Payday Loans Meaning
If you’ve never resorted to taking out a payday loan before, you may wonder how they differ from other loans. Payday loans are loans for typically small sums of money that must be paid back within a short period of time. The name “payday” refers to the practice of the loan needing to be repaid with interest on your next payday, though not all payday loans function in this way. Payday loans are also easily accessible to most UK citizens, because applicants need little more than a form of identification and proof of employment and/or income. That makes these loans attractive to those with bad credit or those who otherwise don’t have access to credit cards. They are often used by military members returning home or to migrants new to the country and looking to get on their feet fast.
High Interest Rate Loans
While these loans provide applicants with a way to get access to cash fast when an emergency situation arises, or when they simply need a way to make ends meet until their next payday arises, there is a catch. With no restriction on interest rates for these loans currently in place in the UK, these loans usually have very high interest rates. Few people really take the time to calculate what the loan is going to cost them when they apply, and are then surprised and often overwhelmed at the interest that they incur in just a short amount of time.
Average Payday Loan Cost
In the UK, the average payday loan totals around £500, and the typical annual percentage rate, or APR, is 1,000% or more! That translates to an interest charge of around 25 pounds owed each month for every 100 pounds borrowed. For a £500 loan, the interest charge could total more than 125 pounds per month. As these are short-term loans, the period for repayment of the loan and of the interest charge is also short-term, which can be a challenge for individuals and families who are already struggling to make ends meet.
If you find yourself in desperate need of money with no other way to obtain it, a payday loan may feel like the only option. But if you are struggling each and every month to make ends meet, and are sliding towards bankruptcy and wondering when a process server is going to arrive at your doorstep to deliver a court summons, then payday loans are only going to add to your debt. As an alternative, consider reaching out to friends and family, sell some items that you no longer need, or doing an online search for other tactics to make some money fast before you resort to using a payday loan.
Writer’s Bio: Lewis Murawski is the marketing and business development manager at Diem Legal and Managing Director of Kahootz Media. Need professional help with digital marketing? You can connect with Lewis directly on LinkedIn