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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