Phil MeekinView Profile
Research from price comparison service, uSwitch.com, has found payday loans offer quick and easy cash. However, they are one of the most expensive forms of UK loans, with some Annual Percentage Rates (APR) of up to 9889.3%.
The appeal of payday loans
Initially, payday loans can look very appealing, allowing people to access money quickly without the volume of background checks which going to the bank would involve. This instant access to money made them a tempting option for people needing to pay off an unforeseen bill or tiding over to the next payday.
In the aftermath of the financial crisis, payday loans have become increasingly popular, with budgets being squeezed, and banks reluctant to lend without personal guarantees. Companies such as ‘QuickQuid’, and ‘Wonga.com’ advertise across commercial TV, and the number of people using them is increasing.
High interest rates
Despite the appeal of quick access to cash, as those who’ve already applied will tell you, borrowing through a payday loan company could see you paying back a fortune in interest.
For example; someone with a payday loan of £750 could end up owing £1,687.50 if they defer repayments for five months. Ironically, this means that taking out a payday loan is likely to see you taking on more debt than you had originally.
Simply put, the interest rates on payday loans generally aren’t competitive when compared to rates on the high street.
Payday loan companies are increasing in popularity, with the appeal of getting cash quickly, and without the hassle of many high street lenders. However, this fast access to money is accompanied by high interest rates, with the potential of landing you into even more debt. We’d, therefore, advise that payday loans are reserved as a product of absolute last resort.
If you’re struggling with personal debt, contact Wilson Field for free, impartial advice. We can find the best solution for you, whether it is an Individual Voluntary Arrangement or personal bankruptcy.
Wilson Field will never force you into anything not suited for your circumstances. We are here to advise and guide you to the most appropriate solution for your problem.