Practical tips to help you improve your credit rating and avoid expensive high interest loans
Payday loans offer the opportunity for quick cash, especially if you have a bad credit rating; payday loans can, however, be very expensive and be a route towards financial difficulties if you are not very careful.
Or read further and see the 5 dangers we warn people to watch out for before taking out a payday loan:
Most payday loans are very easy to get, they can often just require you filling out an application form, enter your debit card details (for repayments) and you have your money!
This is good and bad.
For whilst this does offer very good speed and access to funds, there was a reason why the ‘banks of old’ spoke to people to and asked questions before they lent people money – to make sure people could afford the repayments.
So please just be aware that because a payday loan is easy to get, this does not necessarily make them a good idea, for they can be very expensive – especially if you do not pay back on time.
A payday loan may not look too expensive if you are only having it for two or three weeks, but the costs seriously rack up if you cannot pay back on time. See our example of costs below for a payday loan from one of the biggest short term loan providers in the UK:
Please Note – Some borrowers may be trapped in debt by subprime debt
Let’s say that things are regularly coming up where you are about £400 short at the end of the month.
So whilst the £62 cost above may not seem too high if you need to borrow this same £400 every month, over the course of a year this £400 will have cost you £744!
Remember the payday loans companies know that a high proportion of their customers use the loans regularly, so this is how they make their real money!
Please Remember – Payday loans can really impact your credit score. Click here to find out how.
So you can see that with these very high costs how some people can get deeper and deeper into debt; with interest payments quickly becoming higher than the amount of money they borrowed in the first place.
Please Note – Find out – ‘How I escaped a vicious payday loan cycle that left me paying back more than my monthly rent‘
As you can imagine, if loans are not getting paid back on time, the payday loan companies will not be leaving you alone. Some more than others can be very aggressive in chasing for their money, and for most people, this is very stressful and traumatic.
Remember that most people will not enter into a payday loan thinking that things will go wrong and they will end up on the debt spiral.
Just please make sure you are aware of the potential risks of payday loans and are comfortable with the repayments before you take out the loan.
Check out the 9 Reasons Debt Is Bad for You
Payday loans for bad credit are not the only option for borrowing money with a bad credit rating.
A personal loan with a guarantor offers similar benefits (speed, online, flexible repayments), though they can be as much as 10 times cheaper.
To find out how much this type of loan may cost you, plus get a number of loans offers from multiple lenders with one simple application, please go to our bad credit loans page.
It’s essential to remember that payday loans are not the only option for borrowing money with a bad credit rating.
Our personal loans with a guarantor offer similar benefits (speed, online, flexible repayments), though they can be as much as 10 times cheaper. To view our low APR guarantor loans, visit the dedicated area on our website.
See how much you can afford to borrow with our online loan calculator.