Payback when you get Paid

Payday loans are becoming more and more popular but are they the right loan for you? A payday loan is an unsecured short term loan. The general idea is that you borrow a small amount of money that you pay back, plus interest when you next pay cheque comes through. They are quickly becoming one of the most popular products because you can get access to fast cash when you really need it, often on the sameday. Payday loans can be an important lifeline for those who might need an instant cash injection to pay off a bill, overdraft charges or pay for urgent home repairs. Most people are eligible for a payday loan, including those with bad credit. In most cases the minimum requirements are that you have a current account and a regular income.

Consolidate your Debt?

Payday loans are not the answer to any long term financial problems and the interest rates are considerably higher compared to other types of loans. If you are already in debt then you might want to consider a debt management service or a consolidation loan to try and overcome your financial difficulties. If you do need a loan, a bad credit loan can offer more flexible terms and you are more likely to be able to borrow more money over a longer period of time. A debt management plan or credit report service should also be considered as appropriate action to take. As long as you know the facts and understand that make sure you can repay what you owe a payday loan is great for getting out of a short term crisis.

The Office of Fair Trading has announced that it is going to investigate 50 of the top payday lenders to make sure that proper trading standards are met. Over the past year there has been quite a campaign against payday loan companies amid allegations that many of these payday lenders or brokers take advantage of those experiencing financial hardship.

Payday loans are short term loans of anywhere between £80 and £1000 but the interest rates on these loans is often extremely high. If the loan is not payed back in time there are usually extremely expensive penalty fees which must be paid. Some lenders also allow loans to roll over into another month and so the debt simply gets bigger and bigger.

The OFT intends to make sure that lenders perform proper credit checks before lending to ensure that a borrower is likely to be able to pay back the loan. They will also ensure that those targeted for these sort of loans are suitable and not those who are unlikely to be able to pay a loan back.  The OFT will also investigate to what extent loans are rolled over and what charges are incurred through doing this.

Despite the review of 50 payday loan companies members of the public and anti payday loan campaigners feel that the OFT and the government are not going far enough. Labour MP, Stella Creasy who has campaigned against payday loans for many years stated,

“It is the premise that there a few bad apples that I have a problem with – it is the industry as a whole and how it works that causes consumer detriment. As soon as you close down one company, another one will spring up in its place,”

she said.

Waiting for pay day to arrive can be tough for everyone especially when unexpected bills crop up and the end of the month seems so far off. It takes a brave person to admit that they need a little help to pave the gap between pay days but they would not be alone. Many people turn to payday loans for short term cash advances to help ease financial strains.
There are tons of online companies that will be happy to give you payday loans for bad credit and you are not even required to have good credit history. After following a straight forward online application you will then be matched with a lender who will work with you directly to give you the loan you require.
With payday loans, it is your decision to say how much you want and for how long so take the time to look at various companies and their fees and interest rates as these will affect how much you pay back in the long run.

One of the main headlines in the UK this week has been that mothers are missing meals in order to feed their children. This has contributed to the ongoing protest at the way in which the poorest families in the UK are living in credit and are having to turn to payday loans and credit cards in order to make ends meet. Many payday loan companies would argue that payday loans are designed as emergency cash solutions when no one else will lend. However, the problem with this is that it is generally those who are most desperate and least able to afford to borrow who take out payday loans.  It is surely a paradox that for the poor and desperate borrowing to feed a family is far more expensive (if we consider APR) than for a family borrowing to buy a £1 million house or for a company borrowing in order to buy a gold mine. The old phrase that the rich get richer while the poor get poorer has never been more true than today. What is the alternative? If a payday lender is not allowed to lend to people with bad credit, who will? Banning payday loans would only encourage unregulated loan sharks. I believe there is an obvious answer. It is time for a higher level of regulation among the payday loan companies. If a lender takes the risk to lend to a person without credit for one month then we cannot begrudge a lender earning £30 from £100 lent. However, hidden fees or encouraging the consumer to borrow again will not benefit the reputation of this market place. If the lenders and brokers clean up their act they will also find themselves lending to a wider spectrum of society who will find it more acceptable to borrow from a service for people with bad credit as long as the business is transparent in its dealings

It has recently been suggested that Payday loans could become more popular than credit cards a s a form of lending. The accountancy firm Price Waterhouse Coopers (PwC) has highlighted the issue that borrowers with poor credit ratings who are unable to borrow from lenders such as banks and credit card companies are seeking alternatives such as Payday loans.

A director at PwC Simon Westcott remarked in The Guardian that,

“consumers are pleasantly surprised at the convenient and innovative service they receive from these smaller, more agile providers.”

While the Payday industry is still viewed with suspicion among many main stream borrowers, due to the increasing popularity of Payday loans, they are inevitably becoming a more attractive option to consumers whose credit ratings are low. Bad credit pay day loans are truly becoming a viable option.

Payday loans tend to be small loans of up to £1000 and the lending term is usually for a maximum of one month. Mr Westcott believes that the short term nature of these loans and the small amounts which can be borrowed actually appeal to a consumer who is borrowing in such an unstable economic environment.

Meanwhile, credit cards have been in decline over the past two years. In 2011 the number of credit cards owned in the UK dropped by nearly 1 million. While Payday loans are not a cheap method of borrowing, if you have a bad credit rating then the options are rather limited. There are not many companies that give loans with no credit check. If  a small amount such as £100 is borrowed for one month and £125 must be paid back then this does not seem to unreasonable.  However, the problems arise when people borrow larger sums which they cannot pay back and end up in financial freefall.

Consumer rights campaigners are pushing for more stringent laws to govern the Payday loans industry in order to prevent the consumer being taken advantage of. The Finance and Leasing Association of which prominent Payday Lender Wonga is a member has updated its code of practice to prevent payday loans being rolled over more than three times.

However, the chief executive of the Consumer Finance Association which has many more Payday Lender members has suggested that limiting roll over’s on payday loans might not be beneficial for the consumer because once people are no longer able to borrow from payday lenders they could seek a more unofficial alternative.

Labour MP Stella Creasy who is campaigning for caps on Payday loans doesn’t believe that limiting roll over’s is going to make any significant difference and that people will simply pay off their loans before immediately taking our another.

While many agree that rules regarding the way in which payday loans should be more stringent, most companies do express that payday loans are designed for people needing fast cash.  These loans are expensive because the people borrowing are high risk due to poor credit ratings. It is against the law for anyone under the age of 18 to take out a payday loan and people should avoid borrowing if they cannot repay the loan at the allotted time.  Dan Macdonald chief of the Medway citizens advice bureau has stated that payday loans,

“should not be rolled over.”

There is no doubt that over the last four years it has becoming more difficult to get a loan than ever. The banks won’t give you a mortgage unless you have a great credit rating and a serious deposit and if you are looking to borrow money for your business then expect to see some high interest rates. It is even worse if you have a poor credit rating. The banks are highly unlikely to lend to you at all and so your options are immediately dramatically reduced.

For small emergency cash loans of up to £1000 people with bad credit can borrow from payday loan companies. The problem with this is that the interest is far higher than it would be in a bank, sometimes with a representative APR of over 1000%. Theoretically these are short term loans so the company will not expect you to borrow for more than a month which means that you should be able to pay back what you borrow when you get paid. However, the fees for those who cannot pay at the end of the month can be very high and push borrowers into even more debt.

Many argue that the interest rates and fees on payday loans are extortionate. However, lenders are taking a much higher risk lending to people with bad credit and many borrowers do default. Realistically there must end up being a compromise by which hidden fees are avoided and lenders should become more transparent about their service. While the banks won’t lend in this economic environment there is always going to be a need for sub prime loans. There is no necessity for these loan companies to dwell in a murky and disdained financial area. People will accept that higher interest rates are necessary for higher risk loans but lenders should be as transparent as possible rather than hiding in the shadows.

Some months have gone by since the UK recovered from the downturn. Now, the economy is managing the after-effect, and the Conservative party is giving this a go by introducing severe austerity measures. These include plans for public spending cuts and an increase in taxes. But is the public getting any better at dealing with debt?

Under the latest research, regular British consumers are improving at paying off their existing payday loans debts, but doesn’t automatically convey that they are not stacking up more debts. Saving has gone up, so clearly there is evidence which shows that people are more wary about the sums of spending they undertake. However a compendium is only capable of displaying an overall picture for the whole country. Truthfully, private debt is still rather steep and there are many individuals who have a hard time with money every day.

On an almost daily basis, there are new warnings about shady lenders such as loan sharks, which lend money illegally to people who are in dire need of money. Loan sharks are not registered as official lenders, and usually charge extremely high interest rates, which the individual wouldn’t manage to pay back. When the victim finishes in further debt with the loan, the loan shark will either hand out more money at even more extreme interest rates or introduce threatening or violent behaviour to enforce settlement.

It is never worth going to a loan shark because the situation inevitably brings lots of unnecessary trouble. But what about alternative non-bank loans on offer nowadays? What exactly is available and which products are secure?

There are lots of authentic loans on the UK loan market today. These include payday loan or cash advance loans, logbook loans, guarantor loans and many more independent credit products. They are not generally sold by traditional lenders yet you can find them on the internet or in television adverts.

Payday loans are on offer to households who do not hold a perfect credit score, or who may have been turned down for a lending product from a mainstream bank.

So even if an individual has been bankrupt or is jobless, they will usually be taken on by payday loans no credit check lenders. Because the borrower carries a larger risk factor to the payday loan lender, the borrowing rate on payday loans are usually a bit more steep compared with other loans. This is due to the fact that the borrower is more likely to experience some problems to repay the loan, considering their past performance with lending products. By introducing a slightly larger rate, the loan provider is dealing with the extra risk level. However, payday loan provides are (for the most part) fully legal lenders and will not use any of the tactics employed by loan sharks. Certainly, it is great news to an individual who has money worries, that they may borrow up to 500 pounds and receive the funds fast. Yet if they are already in a lot of debt, then it could be careless to take more debts.

Fears that the UK has already slipped back into recession were not helped but the most recent unemployment figures which suggest that unemployment is at its highest in 17 years having risen to over 2.69 million. The increase was not unexpected but it will lead to stronger animosity against the government who many feel is not helping those who are most in need during this difficult time.

David Cameron has stated that,

“any increase in unemployment is disappointing and obviously a tragedy.”

However, many people feel that the government’s austerity measures have led to increased unemployment across the UK and are not good for the country as a whole.

The government had originally hoped that the private sector would compensate for the large job losses in the public sector. Unfortunately this simply isn’t the case as not enough jobs in the private sector have opened up in order to fill the void of the 67,000 public sector jobs which have been lost over the last two years.

Unemployment is particularly high in Scotland and Labour has even suggested that Scotland is,

“in the grip of a national crisis”.

Between September and October last year the number of those unemployed in Scotland increased by over 19,000 which is the worst increase Scotland has seen in 18 years. Like everywhere in the UK youth unemployment is particularly problematic with over 88,000 Scots between the ages of 18 – 24 unemployed.

George Osborne has also hinted that the growth figures for next week are not likely to be good and the UK faces,

“very difficult”

times ahead.