Both the Money Advice Trust and Citizens advice are warning consumers that an introductory 0% instant cash loan deal could lead them into an out of control spiral of debts.
Debt counselling charities advise struggling borrowers to steer well clear of the interest free, short-term loans being offered by InstantLoansDirect.com. The payday advances are interest free for the first eight days and then attract a fee of 50p per £100 for every day the loan is outstanding.
Joanna Elson, the Money Advice Trust’s chief executive, said this type of offer could be very dangerous for people who are struggling to get their finances under control. If borrowers end up in a situation where they are unable to meet their repayments, they are faced with astronomical interest charges.
The company could actually lose money if everybody repaid their loan within the eight-day period. However, the chances of that happening are extremely remote. She went on to say that robbing Peter to pay Paul is not the best way to manage debts.
Moira Haynes from the Citizen Advice Bureau said the charity had experienced a fourfold increase in clients taking out short term loans over the last two years, and many of them already had financial problems before taking out the loans.
One of the major concerns is that these loans are so easy to obtain, she added. Even unemployed people and those on very low incomes are managing to get no credit check loans.