Do you know the real deal when it comes to pay day loans? Do you think its an easy access to instant money. Anna Nuttall investigate on these pay day loans and how it won’t be the solutions to all your money problems.
It’s easy when doing a little bit of online shopping, you find that perfect little summer outfit and before you know it you find yourself clicking on ‘Add to basket’ and soon enough you are on the checkout page but why stop there? Why not pick out that perfect bikini for your summer holiday with your mates? Or that perfect maxi dress you saw one of the girls from the Saturdays wearing last week at a club, after all it will be perfect for a Friday night out with your friends. So, you have filled up your virtual basket and are on the payment page when, uh-oh, there is a problem. The transaction got declined and there is a problem with the card – due to the lack of funds in your account. It’s looking like the perfect summer wardrobe might not be a reality, and your plans are now ruined. After crying into a cup of coco and searching through Google, you come across a ‘payday lender’ or a ‘money loan’ company where they promise you instant cash and no bank checks-up, and voila, before you know it you are able to buy that perfect summer wardrobe and have that perfect summer you dreamed about.
However have you ever thought about the consequences of borrowing from these ‘payday loan’ companies which promise you instant money and the ability to solve any of your money problems? This is only the start of your problem and especially concerning money; did you take the time to look at the APR before you clicked apply? Or did you Google the said companies and read previous reviews? It is often too easy to get caught up in the hype these online money companies and what they have to offer, live for the moment and not worry about tomorrow.
Tomorrow comes around. More and more letters arrive at your doorstep, becoming harder to ignore and before you know it – you are in knee deep in debt. This wasn’t supposed to happen, debt collectors knocking at your door, and you trapped. It is only when you go back to the said company and start to read the small print, the APR is actually 4214% and you only had 9 days to pay it back (actual example based a £265 loan from Wonga.com). The sinking stomach ache starts to kick in, how the hell are you going to get out of this mess?
It’s like scene from the books and film ‘Confessions of a shopaholic’ where the main character Becky Bloomwood would use every excuse she can think of as to why she hasn’t paid her bills and is finding herself more and more in debt and is constantly harassed by her bank manager.
It only has been in recent times that, since the start of the recession and the bank crash of 2007 the rise of these online money lenders has come into prominence. According to a statistic by the CCCS (Consumer Credit Counselling Service) each year 1.2 million of people in the UK resort to online payday lenders as a temporary measure to get by, while £1.2 billion is being borrowed from payday lenders every year in the UK.
The question here is could payday lending become addictive and could you actually become hooked on these payday websites which promise you instant cash solutions to your entire money problem? When examining addiction and when likened to another form of addition such as gambling, where you also find yourself become dependent on the perceived winning of money and see it as a way out of your financial situation but it is really a game of luck and chance, a hit or miss situation. With the payday lenders however it isn’t a hit or miss situation, the payday lenders are the winners while you yourself are the loser, a blindfolded scam covering up the basis of an addiction.
The not-so-hidden secret that these companies don’t like to advertise is their APR. It is what will lead to all your financial problems, and it is important to point out the fact that these companies often have *much* higher APR than those of the high street banks. So what exactly are APRs and why is it important to notice these? APR stands for Annual Percentage Rate which, in a nutshell, means a way in which the financial industry measures loans and the interest on them; it’s a percentage rate for any loans or credit. It’s important to understand that the lower the APR on a loan the better, the highest will add on excess interest and that is what essentially can lead you into trouble. For example, if you borrow £400 and are given a set time to pay it back, let’s say 10 days, then you will have to pay back £446 (approx.) based on the high APR which was set (in this case 4214%). The APR will be your downfall and it is this that will leave you into debt, thinking you only have got £400 to pay back when it fact it is lot more than you think and you are given a set time to pay it back.
It’s important to note and to remember that if you do take out a payday loan, you must have full knowledge of the working of the APR and how you need to pay the money back and that you are the one in control, not the other way round. It’s by your own free will that you have decided to use these companies and have not been pressured by these companies to take out a short term loans. It is important to understand that you can set how much money you can borrow, all very clearly stated on the front page i.e.: Wonga.com gives you a sliding tool which allowed you to choose how much money to be borrowed for however much day you need. 97% of Wonga.com customers felt it was very clearly stated and they were the one in control.
While this might sound like a perfect decision to make, it will likely cause problems later as repaying this month’s loan plus interest will make you even shorter of cash next month. So if you do find yourself short of money, and waiting around to find that pot of gold at the end of a rainbow isn’t helping you, then go to a high street bank and explain your situation and most will be happy to help you – for a price. One way around this is to avoid over spending in the first place, set out a budget and stick to it, don’t spend your month’s wages in one go – even it out and work out a plan. Ask for help if you need some extra cash; ask your parents or your best friends, it is better to be lent money from someone you know rather than an online payday company.
If that isn’t an option for you and you are in knee deep in debt, there are various charities and companies which will be willing to help you. One such company is Debt Support Trust while the CAB (Citizen Advice Bureau) is another place to turn to. The important thing is to remember that there are companies which are willing to help you and to guide you on the right path.
