Payday Loans are a blight on our modern society. In response to the financial crisis in 2007/08 they rose up like a wildfire and engulfed our high streets. Unfortunately, their use is becoming more and more common, despite the fact that their dangers are becoming consistently more obvious to the general public. You should always avoid Payday Loans at all costs.
Payday Loans often charge extortionate interest rates, especially if you’re paying late. These rates can quickly compound to take a £100 loan to a debt in excess of £5000. The Money Shop, and sister company Payday UK’s, representative APR is an astounding 6310%, and on top of that they charge a £12 late payment fee—although it would be the least of your worries, if you got into trouble with them. So if you want one reason, and one reason alone, then look no further than their excessive interest rates.
Payday Lenders use what is called the Continuous Payment Authority to take money directly from your accounts. You sign up for this when you hand over your card details and from then on they can take the amounts required on payment dates. This means that if you can’t afford to pay it but you have money in your account, then they’ll drain it. They have no concern if that money was earmarked for your rent that month; it’s all theirs. To continue draining money from your account they only need to use the CPA, they don’t even need to go through a court. You can cancel a CPA by contacting your bank, and thus avoiding the dangers. Unfortunately if you should choose to do so, Payday Lenders will hit you with fines. The Continuous Payment Authority allows Payday Lenders to drain your bank account dry.
These are only two short reasons about why you should avoid Payday Loans, and there are hundreds more out there; all you need to do is search for more reasons and you shall find them. There are so many alternatives out there to these dangerous lenders, from secured loans, credit cards and budgeting to pawn shops. Never deal with Payday Lenders, because for many people it’s a spiral into humongous unserviceable debts.