It’s quite easy to fall into the trap that payday advance lenders set for you, but the truth is these ‘instant cash loans’ are too good to be true.

You’re lucky if you can go an entire day without being bombarded by adverts on television, on the radio, or even over the internet when it comes to payday loan providers. The majority of these short term loan providers will even advertise no credit check loans, meaning you an still gain access to lending even if your credit rating has suffered in the wake of the recession, but none of these adverts ever go in depth into the dangers you face if you actually avail yourself of these offers – as the consequences can be dire for people who fail to repay their loans in time.

SOONER OR LATER, YOU PAY THE PRICE

It seems highly implausible that there are lenders out there that don’t require you to jump through a series of hoops before providing you with cash loans. However, it’s absolutely true that many payday lenders will only ask that you prove you have a steady job before agreeing to provide you a loan, oftentimes skipping over the step of having you submit to a credit check; however, you need to beware any lender that is willing to do this, as you’re making a trade off for convenience up front for a possible headache once it comes time to repay the loan, what with the massive costs lenders tack on to a payday loan, sometimes without even telling the borrower what they’re going to be!

High street loan products are regulated within an inch of their lives, thanks to watchdogs such as the Financial Services Authority and the Office of Fair Trading. However, payday lenders are by and large operating without any governmental oversight, leading to some loan provider charging more than 4,000 in annualised interest and some of the most punishing charges when it comes to late fees; these fees and interest rates can be so high as to actually leave low income earning borrowers much worse off than they were prior to taking out a payday loan, locking them into a spiral of rapidly compounding debt that can all too easily become completely insurmountable.

NO CREDIT CHECK, BUT IT STILL LEAVES MUDDY FOOTPRINTS ON YOUR RECORD

It is indeed true that quite a few payday lenders operating in the UK don’t require a credit check. However, payday lending leaves a mark on your credit history like a set of muddy footprints, and even if you pay back your payday loan on time and in full, some high street lenders will look at these muddy footprints and use them as an excuse to turn you down for a traditional loan.

Reports have emerged that some lenders are using payday lending activity as reason to decline loan applications for prospective borrowers with otherwise healthy credit. These lenders say that relying upon a payday loan even once in a 12 month period may indicate financial distress and uncertainty, so do yourself a favour and stay away from payday lending if you plan on taking out a mortgage sometime in the New Year.

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Image: Keep out of debt by Bill Luken