A Payday loan is designed to tide you over until payday and should NEVER be considered for long-term borrowing. If you cannot afford to repay the amount in full once you get paid, or will leave yourself short at the end of the next month – these loans are not for you as they can be extremely expensive.
Research has found that out of those who have taken out a payday loan, 60% of them regret the decision. A further 48% of people confessed that taking out a payday loan has made their financial situation worse. Payday loans have extortionately high interest rates. Interest can rapidly build up if payments are not made on time and soon become more of a debt than the original loan. There is no legal limit on loan interest rates and this is why lenders can charge extortionate amounts.
Typically, you’ll find that lenders charge you around £25 for each £100 you borrow. You might think that paying this amount doesn’t sound too bad. If you decided to borrow £500 the total amount repayable would be £625! That’s an interest rate of 25% for just one month, and it’s equivalent to an APR of 1,737% which is horrendous!
The other problem with payday loans is that even if you have very good intentions of paying off the loan in the first month, it’s all too easy to extend your loan for another month – and then another. Lenders call this a ‘deferral’ which means you postpone repaying your loan for a second month or more. What’s worse, some lenders will automatically keep extending it until you tell them otherwise.If you choose to defer your loan, you’ll still have to pay back the original interest on the initial due date. You’ll then incur another interest charge for the next month. Carry on doing this and you could end up being plunged further into debt.
Some people are becoming so addicted to cash advance loans that they borrow money from more than one company, this is truly the start of the slippery slope and can have very serious financial consequences, also it can involve the whole family leading to divorce and the break up of the family unit.
If you can’t cope any more and the pain’s too much, contact the Debt Advisory Service now. We’ll help relieve the pressure, something payday loans can’t do.