Hi everyone,

I don’t think you’ll be surprised to hear that payday loans are a hot topic at the moment.

Maybe it’s just me, but I can’t remember the last time I checked my daily news feed and there wasn’t something on the subject.

Anyway, I’ve now posted up version 3 of this particular video, having added quite a bit since I originally recorded it a few months ago.

Inside the video, I discuss how a payday loan is supposed to work and what they should NOT (ever) be used for. I also reveal the single biggest pitfall that so many unsuspecting customers fall into.

I’m not sure how your own finances are shaping up, but I really hope what i’ve got to say is helpful. If you enjoy the video, please do share it on Twitter, Facebook and Google+. You can also forward it to a friend by hitting the ’email’ link above.

Talk soon,
Martin Smith

Transcript of this video: What is a Payday Loan?

Hiya, my name is Martin Smith, and welcome to the Payday Loans Information Centre.

Before we get started, can I just say a big thank you for reading my rather direct message above and deciding to click play.

First off, I can assure you that you’re definitely NOT alone.

In fact, this video now been downloaded over 50,000 times, and if truth be told I am getting a little freaked out by number of emails I’m getting from people who need help with their finances.

Anyway, the bottom line is this. If you watch this video from start to finish it’s going to save you a shed load of money. Fact.

The video lasts about 7 minutes and covers off pretty much everything you need to know about getting a payday loan.

Why should you listen to me?

Well, believe it or not but I’m a fully qualified accountant, and have been since 2001. I’ve got a degree in business studies, an A level in maths and…I REALLY understand this stuff.

To be honest though, I never set out to be this so say expert on the subject of payday loans and there’s certainly nothing special about me.

But in case you WERE wondering, I’m not some corporate dude working in the payday loans sector, I’m not a politician, and I’m definitely not some slick salesman that’s gonna feed you a whole heap of crap.

I’m just a regular bloke from Bristol with two kids, a wife and a dog to look after. I guess the only difference really from me to the next man is that fact whilst I did used to be in a lot of debt myself, I kind of turned things round and now I am absolutely obsessed with the subject of money and finance.

I love talking about it, I love reading about it and I actually get a real kick out of helping people with their personal finances, which is one of the main reasons why I started this website.

The way I see it, this country is royally screwed financially because people were never taught in school how to manage their money, and unless you have some weird bizarre passion for it (like me), you’re always going to struggle to balance your income with your outgoings.

Now that I think about it, maybe this is why so many people are visiting the website and sending me emails. Whilst the number of enquiries are getting a bit out of hand, I can completely relate to the issues people have with money.

Ever since I was a boy I’ve had to be careful with MY money and make every penny count. My mum single handily raised my brother, sister and me on a pittance of an income so I know first hand what’s it like to live not knowing if your money is going to stretch until the end of the month.

It actually breaks my heart to think that there’s people like you and me RIGHT NOW either walking down to the local payday loans shop on the high street or about to sign up with one of the providers online.

So, without any further ado, let me tell you what I know about payday loans and then I’ll let you judge for yourself whether you still think it’s a good idea to get one.

So what exactly IS a payday loan? Well, before I answer that question I think it’s probably best to tell you what a payday loan is NOT.

1. (One).

A payday loan is NOT a magic bullet for someone who is already struggling financially. So if you’re unable to pay your regular monthly expenses, how the heck do you think you’re gonna be able to afford the repayments on a high interest loan? Seriously, If the loan isn’t paid back on time and in full, it’ll quickly spiral out if control. So please, if you ARE in this situation, and you need money to just to pay your day to day expenses, do NOT under any circumstances even consider taking out a payday loan, cause it’s only going to make matters ten times worse.

2. (Two).

A payday loan is NOT a form of long term borrowing. If you need to loan some cash for whatever reason, but you can’t afford to pay it back within the next 30 days, do NOT take out a paydayloan. Period. Just don’t do it.

3. (Three).

A payday loan is NOT a cheap form of borrowing money. No matter how happy, fun or funky a payday loan company makes itself out to be, the fact is they’re going to charge you a proportionately higher interest rate than most other forms of short term finance.

So now you know what a payday loan is NOT, here’s my best take on what a payday loan actually is, how in an ideal world it should be used, and why these things have grown so damn popular over the past couple of years.

I must have personally read about 100 different explanations but the basic principle is this.

It’s getting near to the end of month, and due to unforeseen circumstances, it looks like you’re going to run out of cash before your next payday.

Since the credit crunch, it’s gotten increasing harder to borrow money. Cheap bank loans, credit cards and overdrafts are a thing of the past. And even if you can get one, it’s going to take weeks to arrange, often involving a shed load of forms, credit checks and face to face interviews.

So, to bridge the gap, you apply instead for an instant cash loan of anywhere between £100 to £1,000. This is usually done online, without any human interaction or credit checking whatsoever, and once accepted the money will often arrive in your bank account within an hour.

You’re happy because you’ve got the cash you needed to tied you over and the payday loan provider is happy because as part of the loan agreement, you’ve given them consent to automatically deduct the original loan amount + interest straight from your bank account on the very day you get paid.

Simple, right?

Well, this of course is how it’s supposed to work in practice, but the truth is, not all payday loans are quite so straightforward.

There’s load of things that go wrong between initially applying for the loan, receiving the money and then eventually paying it back.

I’ll cover off some of these in another video but to keep this one short and sweet, I’m going to focus on, as i see it, the number 1 issue with payday loans, which is something I call the rollover trap.

Payday loan providers aren’t silly, which is why the very moment you take out that first payday loan, they’ll be hoping (praying even) that you fall into the rollover trap.

The rollover trap is a vicious cycle that kicks in at the end second month when, having already paid back the loan and interest from the previous month, and with all your usual expenses to maintain, you again run out of money before payday.

So what do you do? You take out another payday loan and basically repeat the process. This continues month after month until you reach the stage where you simply can no longer afford to payback the loan, even on payday.

So then what do you do? You’re forced to extend the loan for additional fee AND now pay interest on not only the original loan but also the accumulated interest and charges, creating a snowball effect.

Pretty grim huh?

And no matter what they say to the contrary, the payday loan providers absolutely LOVE this scenario, because frankly, they’re making a bloody fortune out you.

Ok, to summarise, if you are still thinking about taking out a payday loan, I hope you’re now going into it with your eyes wide open and please, for your own sanity and that of your closest friends and family, pay the bugger off on the day it’s due and do whatever it takes to NOT slip into that deadly rollover trap.

If on the other hand, you’ve decided that a payday loan is not for you, then I suggest you stick around and check out the rest of this website, in particular the payday loan alternatives video below.

It may not seem like it but you DO have other options, some of which the payday loan providers would rather you didn’t know about.

Anyway, I’ll sign off for now and leave you to chew on some of the key points I’ve raised in this video.

I’m Martin Smith, thanks again for listening and I’ll talk to you soon.