You may have heard about Payday Loans. Perhaps you’re even considering applying for one to help you through a particularly tight time financially. Before you do, check out the facts and see if there may be other alternatives, especially if you plan to use the money to pay off other debts. Here’s the truth about Payday Loans:
- Payday loans have some of the highest rates of interest (up to 400% APR)
- Payday loans are usually for amounts between £50 and £1000
- Payday loans are designed to be repaid within days or weeks
- Payday Loans are deducted directly from your bank account, but not always on a day that suits you
- Payday loans can be rolled over to the following month – but there are roll-over fees and high interest rates
- Under FCA rules you can only roll over a Payday loan twice before the balance becomes due
Payday Loans demand high repayments
People often see a Payday loan as a short-term solution to an unforeseen emergency.
You need to get cash quickly and are sure you are able to repay it once your pay is in your account. All too often, life does not quite turn out how we plan it, especially when it comes to money.
Payday loans are a legally binding contract between you, the borrower, and the lender.
Bear in mind that a loan with 400% APR means you will be paying back four times as much as you borrowed, if the term lasted for one year.
Defaulting on a Payday Loan
Failure to make a repayment can result in excessive penalties. In some cases, even if you are just a few days overdue you can end up paying many times more than the amount you borrowed once interest and late fees are added.
Payday Loans can cause more debt
You must have employment and a bank account in order to arrange a Payday Loan. This allows the creditor to take repayments directly from your bank.
Unfortunately, if the payment is deducted unexpectedly, it can result in your other monthly payments such as rent, council tax, credit card payment or utility bills being refused due to insufficient funds (with more bank fees added).
What happens when you can’t repay a Payday Loan?
Due to the short term nature of any Payday Loan, once you have defaulted on a payment, you will find yourself receiving threatening letters and phone calls within a matter of days.
That easy solution can quickly turn into a debt nightmare and you don’t know where to turn.
Aunt Meg is on hand to help and knows all the facts about Payday Loans.
Our advisors can help you find an affordable solution, not only to your Payday Loan debt, but also whatever your initial problem was for needing a loan in the first place.
By talking to one of our fully trained counsellors, we can help you look clearly at your debt problems.
We can talk to your lenders on your behalf and negotiate repayments that are affordable for you.
Whether you are already struggling with a Payday Loan you cannot repay, or if you’re thinking of taking out a Payday loan to repay other debts, call us first.
Aunt Meg is here to help when you need us the most.