If you’ve ever watched daytime TV, you’ll be used to seeing a host of adverts from instant cash loan companies.
These firms offer short-term loans to people who need some cash to tide them over till their next salary hits the bank. However, if the loan is not repaid on time, the borrower can be faced with sky-high interest charges.
Payday loans UK companies are now venturing into medium-term lending and offering 12-month quick loans. The application process is quick, credit checks are minimal and the funds will be deposited into your bank account within 24 hours.
No credit check short term loans became popular in the UK during the recession. Generally, they charge around £25 for each £100 borrowed providing the money is repaid within 28 days. The majority of banks levy similar charges for unauthorised overdrafts. But if you miss the payment date, you could end up paying an APR in excess of 1,300%.
Some experts have expressed concern about these companies moving into the medium-term lending marketplace. At least three firms are offering loans at an APR of 278% – meaning a £500 loan would cost £949.01, and that’s providing you don’t fall behind with the repayment schedule.
Una Farrell from the Consumer Credit Counselling Service warned that high-cost credit like this could lead people into serious financial difficulties.
As Moneynet’s Andrew Hagger pointed out, borrowers with a less than perfect credit history are often turned down if they approach their bank for a loan. Therefore the only place to turn is an instant cash loan company and lenders are taking advantage.
If you can’t obtain credit from your bank and need to obtain a payday advance, it is vitally important that you can repay the debt in full and on time.