You could end up in a dangerous cycle of debt if you take out high interest short term loans to supplement your paycheque.
That’s the warning issued by the Consumer Credit Counselling Service’s spokesman, Matt Hartley, who said that Brits who find themselves habitually taking out payday loans to help make ends meet are on the wrong track. With the typical cost of a £100 payday advance totaling £125 when it comes time to be repaid, you’re going to be hard-pressed to find the extra funds come payday, Mr Hartley warned – especially if you’re already short on cash.
Some providers of instant cash loans are not making it any easier on down-on-their-luck Brits by charging exorbitant annualised percentage rates on their financial products. An APR of 1,400 per cent is not unheard of, but even higher rates are just as common – one well-known lender charges more than 4,000 per cent interest on its loans!
Relying on emergency credit once or twice is one thing, the CCCS spokesman said, but it’s better to eschew payday lenders completely and simply budget your monthly expenses much more carefully. Drafting a budget will ensure that there are no surprises when it comes to recurring expenses, and can offer insight into ways you can trim back on needless expenses or increase your income, thus minimising or eliminating the need to take out same day loans from a payday lender to help meet ends, Mr Hartley also added.
If you do need lending, consider turning to your local credit union and becoming a member. Not only will you gain access to affordable credit, credit unions will work with you to put money aside for the future, thus making it easier to weather the kinds of emergencies that would otherwise see you locked into that dangerous payday loan debt cycle.