The 5 Dangers of Payday Loans for Bad Credit

Published by Jon Edward at February 23, 2015

Danger 1 – Pay day loans are very easy to get

Most payday loans are very easy to get, they can often just require you filling out an application form, entering 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 loans 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.

Danger 2 – Payday loans are very expensive if you do not pay them 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:

• Borrow £400 for two weeks your costs will be £62 on top of the £400.
• If things get in the way and you cannot pay back for 5 weeks, this will rise to £147, and you still have the £400 to pay back!

Danger 3 – Payday loans get super expensive if you use them regularly

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!

Danger 4 – Payday loans can be the start of the debt spiral

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.

Danger 5 – Debt can have a very negative effect on people

As you can imagine, if loans are not getting paid back on time, the pay day 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 a 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.

The Lower Cost Alternative to Payday Loans – The Personal Loan with a Guarantor

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 loan offers from multiple lenders with one simple application, please go to our bad credit loans page.[/vc_column][/vc_row]