Payday loans in numbers
- 1 in 2 payday borrowers say they were hit with unexpected charged
- 1 in 2 payday borrowers roll over their loan at least once
- 1.2 million people took out a payday loan in 2011
- 1 in 3 people who take out a payday loan get into more money trouble because of it
(Source: Which? May 2012)
If you’d consider taking out a payday loan, don’t. Think again.
Payday loans are the fastest growing form of credit in the UK. Companies offering short-term loans are all over the press and TV, they are setting up on high streets, and even advertising alongside free apps on tablets and smart phones.
They promise ready cash and a way to keep things ticking over, even for people with poor credit ratings, but they can all too easily lead to spiralling debt.
The trouble is, the interest rates are usually in four figures. Quickquid advertises 1,734% typical APR (average compared to the amount borrowed if borrowed for a year). Wonga says 4,214% is typical.
Plus, there may be hidden charges, or penalties for non-repayment, which can be £150 for being just 10 days late.
If you get behind, the company simply offers more money – sometimes by text. So you keep paying.
The Good Practice Charter, signed by 90% of payday lenders was introduced in November 2012 and improved practice to some extent. For example, those who sign up agree to freeze interest and charges if a customer is in financial difficulty and making payments under a repayment plan, or after a maximum of 60 days of non-payment. Click here to download the charter, which governs lenders who are members of the Consumer Finance Association, the Consumer Credit Trade Association, the BCCA, or the Finance & Leasing Association.
Even so, Quids In! says if you are tempted to take out a payday loan, think about why you need one. If it’s for bills, or everyday items because you can’t stretch your income, you need long-term help and maybe some advice on better budgeting. A payday loan might do more harm than good.
If it’s a one-off emergency, make sure you can meet the repayments, otherwise the cost of that loan will not only push you further into debt.
It’s better to put a little aside in a savings account for unexpected extras. Even coins in a jar can soften the blow.
Call them if you are getting into debt trouble.
0808 808 4000
Stepchange Debt Charity
Can help you negotiate payback terms with your lenders.
0800 138 1111
Credit Unions can offer an alternative to Payday loans. Join one now, ready for that rainy day.
To find your nearest credit union, call 0161 832 3694
Citizens Advice (CAB)
Citizens Advice can help you deal with payday lenders.
Find your local branch on www.citizensadvice.org.uk