There was a time when people used pawn jewellery and other things of value to get quick cash before payday. As the recession has hit many people have been forced to sell most of their valuable possessions and having nothing else left to pawn but then came payday loans.
What are payday loans?
Pay day loans are loans that are taken out for a short period of time such as a few weeks to a month. It’s a way of having a small loan that doesn’t mean having to repay it back over a long period of time; most people take out a payday loan when they have a very tight month where essentials like bills cannot be paid. Payday loans are usually paid back after the end of the month but you can defer the outstanding payment for up to six months if you find it really hard.
Are payday loans better than a bank loan?
Yes and no, banks usually give you loans of thousands of pounds that are repaid over a minimum of 3 years, payday loans are for smaller amounts such as £100 till the end of the month. The interest you have to pay on your payday loan is ridiculous, you can pay as much as £30 for every £100 you borrow, the rates are higher if you defer payment for another few months as the amount payable can be a few hundred pounds more than you borrowed.
It has been estimated that 1.2million people have taken payday loans and many have fallen into the trap of not being able to pay it back. If you keep deferring payment your loan will only get bigger and bigger and this is how many people have now fallen into debt. Payday loans are very similar to loans you get from loan sharks they have a shorter deadline for repayment and sky high interest rates.
Some online payday loan companies are even charging people as much as £100 interest for each £100 loan they take so if you borrow £400 you will owe £800 at the end of the month. Payday loans should only be used as a last desperate resort as the trap and convenience of money on demand can become and easy solution for some. If you must take a payday loan shop around and find the best deal not the company that offers the most money, budget and pay back the money as soon as you can.