Government advises consumers to be aware of payday loan risks

There have been mixed opinions about payday loans over the past year or so, with these loans being highlighted as a result of the rising number of people that have been turning to them because of difficulties in getting credit elsewhere during the recession and financial crisis.

Many officials have expressed concern over the rate of interest that is charged on payday loans, stating that consumers often fail to realise what they are getting themselves into when they take out payday loans because they cannot get finance in any way. However, there are also many people and officials that state that payday loans provide a useful service to those that are in need of finance but can’t get it from other sources because it stops them having to go to loan sharks.

On its DirectGov website the government is now advising consumers to ensure that they learn about the dangers of taking out payday loans before making any commitment, and to ensure that they do not jump in without doing their research as they could otherwise get caught up in a debt trap.

The site states that there are rising numbers of people that cannot get finance from traditional banks and lenders, which means that a rising number of people are likely to go to payday lenders in order to get finance. This could have a further impact on the number of people that find themselves with spiralling debt, which will add to the already worrying personal debt problem that exists in the UK.

The site advises consumers to fully understand the charges and costs involved with payday loans, ensure that they do not borrow more than they need or for any longer than they need to, and to ensure that the lender is a member of the British Cheque and Credit Association (BCCA).

Tags: Payday loan, consumer debt, credit, loan, debt