Practical tips to help you improve your credit rating and avoid expensive high interest loans
Payday advances are some of the most common and popular loans currently available in the UK. However, the truth is that many customers would think twice about submitting their application if they knew the whole picture surrounding how these loans actually work.
The following article highlights some of the main points that you should consider before making any decisions.
When you apply for a standard personal loan, you are generally offered a rate that is pretty reasonable. While things like terrible or non-existent credit scores can drive up the rates, they are nothing in comparison to what payday lenders charge.
In some cases, people end up paying more up to 5000% APR and this is a fact that lenders are happy to leave in the small print.
The Guardian recently took a close look at the controversy surrounding this part of the financial sector – https://www.theguardian.com/money/2013/jun/27/what-is-a-payday-loan
Unfortunately, turning to a payday lender in a time of desperation can have a long-lasting impact on your financing standing.
A record of a payday advance on your credit history is enough to set alarm bells ringing with future prospective lenders and can result in some mortgage lenders becoming quite hesitant to work with you.
Even the record relates to a transaction from some time ago, it can certainly leave a blemish that lenders can use to judge your ability to repay them.
This BBC article explores this in greater detail – https://www.bbc.co.uk/news/uk-25098810
There is no way around the fact that the majority of borrowers targeting this type of loan are doing so because they believe that they have very few options available to them. Unsurprisingly lenders are aware of this and they use it to their advantage.
People with moderate to low incomes are the ones who are generally targeted, and the reasons behind this are very much open to debate. There is a school of thought that states because it is likely to take some time to make the full repayments, the interest rates and APR will cause repayments to balloon, meaning that the lender will get more out of the deal.
Christmas can be a particularly tough time for many people, especially those who are short on money. To see why payday lenders target vulnerable over Christmas, check out the following article – https://www.independent.co.uk/news/uk/home-news/payday-lenders-target-vulnerable-over-christmas-8307387.html
The following video explores the thought the payday lenders are seeking to exploit vulnerable people:
When you are looking for a payday loan, there are many lenders who will get your information from others and solicit you. These are the ones you have to worry the most about since most legitimate loan agencies don’t solicit customers. You never really know who is on the other end of the computer when you are being solicited, which means that you can hand your information over to someone whose only interest is gaining access and making you the next victim of identity theft.
What is identity theft? Click here to find out how you may be vulnerable to identity theft and how it may impact you.
After signing up, getting the money and spending it, you have to worry about paying the money back right away. While there are some lenders who will allow you to pay your balance in full, there are others who require you to follow a payment schedule they set. The way the payments are broken up, you can pay for many, many weeks before any money is actually applied to the initial amount. Basically, most of your payments are applied to interest that has been accrued as the weeks have passed.
Find out more about the pros and cons of interest only loans by clicking here.
As you can tell, there are many things that payday lenders will not be falling over themselves to tell you. Even if you need money desperately, it is best to seek out an alternative and throughout our website, you will find a number of more affordable options.