Payday loans are incredibly easy to obtain, which in theory should ring alarm bells. However, due to unemployment levels and a poor economy, thousands of people turn to payday loans to try and clear their debts immediately. Ironically, payday loans often cause people’s debt problems to escalate instead of acting as a quick solution.
People usually use payday loans as a short term solution to financial difficulty. These loans are typically advertised as ‘convenient’ for those who are struggling to survive before their next pay slip.
Payday loans are increasingly becoming controversial and here are 5 reasons why:
They’re Expensive
All loans are expensive to pay off. No matter how much money you borrow if you miss repayments or decide to extend the loan, what was a small loan can turn very expensive as interest and bank charges are applied.
High-Interest Rates
Interest rates for payday loans are huge. Some lenders charge interest rates of more than 4,000% and if this is rolled over, debts can quickly escalate.
Lenders are keen to describe the way an APR is calculated. APR is generally not designed for short-term lending, thus reducing the loan period means the interest rate goes up. As a result, consumers are unsure of how to compare the correct costs of the various loans available.
They Target the Vulnerable
Sceptics claim that lenders appear to target the most vulnerable borrowers, arguing that lenders are not completing proper affordability checks on debtor’s before granting them the loans. In some cases, lenders have encouraged consumers to borrow more money than they need.
Most lenders will happily allow you to continue borrowing from one month to the next. People who cannot afford to pay off the loans by the agreed date will run serious risk of their debt spiralling out of control. Before they know it they will owe more money than they initially borrowed due to large interest rates alone.
Hidden Charges
When you sign up for a payday loan you will usually agree on a date to pay back the loan which typically falls on or after payday. During the agreement you will provide the loan company with your bank details. If you continue to miss payments, interest will continue to be taken out of your account each month which can easily escalate. You may also need to pay bank charges if you exceed your overdraft limit.
Fraud
Fraudsters are aware that people are desperate to find an immediate solution to their financial worries, providing them with the perfect opportunity to violate vulnerable people.
Taking out a payday loan requires you to disclose confidential information such as your bank details and address. You’ll be surprised at how many illegimate payday loan sites are now on the internet asking for your most confidential details, when they do not even provide their own basic contact details – suspicious. However, when people are desperate and vulnerable they often see past these warning signs. Chances are these sites are fraudsters attempting to steal your personal details.
How Gibson & Associates Can Help You Write Off Your Debt
If you have a debt which you cannot repay, it is important that you speak to a solicitor so that they can explain the options available to you. At Gibson & Associates Solicitors, there are a number of ways we can help relieve you from your debt.
Legal experts at our firm are professional and sensitive and understand what a distressing time this must be for you. We will work with you to provide the best solution, easing the financial burden hanging over you.
Learn more about how we can help you by filling out the enquiry form, or email [email protected]/ or call us on 1890 989 289.