Payday loans – the dangers
Payday loans… we’ve all seen them. They’re marketed as a short term solution; need to pay your car finance? Short of money for a night out? Need to pay that heating bill you didn’t budget for? The companies who provide these loans want you to believe they’re a viable financial option, when in reality, they’re far from it. Over the last few years these payday loans have become big business. Unfortunately with big business comes big problems for those who use the system. With that in mind we decided to reach out to you all and discuss some of the dangers of payday loans.
Living within your means
First of all let’s discuss the actual issue. If you need a payday loan chances are you’re living outside your means emergencies aside, however even in emergencies we would suggest exploring what other options are available to you first. If you’re thinking about using these services for something as trivial as a night out, or because you’re desperate to play the latest Call of Duty game, then stop and take a look in the mirror! Is it actually worth potentially getting into financial difficulty because you aren’t living within your means? The best thing to do is the obvious one, wait until your next payday or student loan payment.
Right, let’s discuss the loans, there are two types of payday loans, long term and short term:
For this example, let’s look at the innocently named Sunny loans, sounds charming right? Well… if for whatever reason you decide to take up Sunny Loans up on their “Sunny Plus” loan offer, you can borrow up to £2500 right here, right now, how amazing right? Just think of what you could do with all that dosh! Hold on a minute… have you read the small print? If you borrow £1400 over 14 months you’ll wind up paying back a whopping £2746.77, that’s very nearly double the amount you borrowed!
Whilst we would never condone using this type of service, if you’re forced to do so, this has to be your only option. We can’t stress enough how closely you have to monitor the situation to ensure you don’t incur extra fees (late payment penalty for example). If you used the increasingly popular wonga.com, then £400 loaned over 30 days would cost you £96 in interest, so you would have pay back £496, that’s almost 1/5 of your total loan.
Both of the above examples show that no matter how you use them you wind up paying back a frankly crazy sum. Are they a sensible option? No. The biggest danger is you become reliant on this type of loan, which is a sure fire way of finding yourself in financial difficulty.
- This isn’t a viable way to get yourself out of debt. If you’re in financial difficulty, seek professional help; don’t buy into this “easy option, quick fix” as it could actually see you fall further into debt, especially if you can’t sort the repayments.
- If you’re borrowing £400 this month, and paying it back next month (plus interest), you’ll still be £400 down, so in reality you’re just putting off dealing with the issue.
- If you do have to resort to using a payday loan, then you must follow a strict budget, ensuring you don’t miss any deadlines and the money is paid back, in full, by the time stated on the original loan.