The furore surrounding payday loans shows no signs of abating as the furious debate rumbles on. Considering the state of the economic climate these types of loans are becoming increasingly more popular but they are tinged with the slight aroma of controversy.
Payday loans, which provide easy, quick cash to those in need, have been criticised for the excessive interest rates for the repayments, a perfect case of punishing the cash strapped clientele that the loan provides for.
Some APRs can have a figure of 9889.3% which can mean a payday loan of £750 could end up costing the consumer £1,687.50 over five months.
Process
Payday loans work by giving the lender an agreed amount of funds for a specified amount of time.
Before taking out the loan, however it is advisable to be honest with yourself and ask, ’can I really afford this’. There is no point in taking out a loan if when time comes to paying it back you find yourself in difficulties.
An industry insider commented on the growth of these types of loans, saying: '‘After investigating how the home credit market operates, it wasn’t long before I had uncovered pay-day loans of up to a staggering 10,000% APR.”
He added, ‘‘These lenders were allowed to prey on those saddled with debt and struggling with poor credit ratings."
But the dilemma is there, plain for all to see, especially considering the state of the financial climate nationwide. Money is hard to come by in these times and the opportunity for quick, apparently easy money is hard to turn down.
Debt
Beccy Boden Wilks, of National Debtline, a helpline for those in debt, echoed these feelings stating that in a recession some people could get quite desperate, causing them to behave rashly.
"If they can't get another credit card balance transfer, they will start to look at other forms of borrowing, which could be payday loans or pawn broking, which are quite expensive."
Damon Gibbons, of debt campaign group Debt On Our Doorstep, also commented,saying:
"We certainly welcome the fact the OFT says it is looking at the issue of responsible lending more generally in the UK. But we want to push them further to ensure payday lending is at the top of their list and is acted on immediately.’’
"We believe there is a lot more they could be doing to curb the worst excesses of the payday industry," he added.
In fact debt centres have noticed a steep rise in payday loans being taken out, especially amongst the young. The advice from those in the know states that these types of loans should be well avoided unless all other options are exhausted, including begging friends, as the high repayments will only see the situation come full circle.
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