Taking out pay day loans at Christmas could seem like the answer for some, as most people will be getting paid early for Christmas. Which makes waiting for January pay day after everything is spent, particularly arduous.
You may be looking into pay day loans at Christmas time, especially if you’re not lucky enough to have any spare cash or haven’t budgeted correctly. You are not alone, there will be hundreds of people this December and in the New Year looking for alternatives to fund the final push until the next wage packet.
There’s a multitude of alternatives out there but one you’ll always find springs up on any Google search is ‘Pay Day Loan’. With attractive and enticing branding, offering instant cash to tide you over until your next instalment from your employer in 2015.
In theory they are OK – if you have an unexpected, one-off need for a short-term essential where you can identify a clear repayment source.
However, they are notoriously expensive and often attract customers who are at the vulnerable end of society and who may struggle to pay it back.
Pay day loan companies have been targeted by the authorities and have been regulated since April by the Financial Services Authorities. July saw stricter rules come into play where lenders were allowed no more than two rollovers, no more than two attempts to collect by CPA (Continuous Payment Authority – like a direct debit on your plastic) and no part payment via CPA – if a payment of £50 is declined for example – the lender cannot try for a lesser amount.
January will see even more clamping down on pay day loans with new rules from the Financial Conduct Authority to ensure that borrowers are never forced to repay more than double the amount on their original loan, interest and fees will be capped at 0.8% a day lowering the cost for most borrowers. Default fees will be capped at £15 in an effort to protect people struggling to repay their debts.
If you are looking for instant cash there are alternatives to a pay day loan. You may approach your bank and secure an agreed overdraft, pay on credit card to give you time, ask friends or family to help you out, or approach an employer for advice and possible help.
Is it really essential? Can you get away with not having the product or service and save up instead? Missing a mortgage or loan payment, (even with penalties) may be cheaper, but it could damage your credit rating. If none of the above is an answer then a pay day loan may seem the only option.