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

Payday loans soar due to credit crunch

Payday loans have been at the centre of controversy for some time, and this is largely due to the high rate of interest charged by these lenders on an annual basis. However, some have argues that these lenders receive unnecessary bad press, because the interest charged is not that much providing the loan is paid back in time, and some officials argue that these loans can be very useful for those that desperately need short term financial help.

It has now been reported that the level of payday loans being taken out has soared partly as a result of the global credit crunch, which has left many people short of cash and in financial dire straits. In the space of four years the number of people taking out these payday loans is said to have quadrupled, as more and more people find themselves desperate for cash for a short term period.

The APRs that some of these payday lenders charge has caused a lot of concern over recent years, but for those that only borrow for a short period and repay the loan on time rather than rolling it over the cost of borrowing is not as bad as it sounds. Some charity officials have said that it is preferable for consumers to go to payday loan companies for short term loans to tide them over rather than unscrupulous loan sharks.

Whilst there have been calls for these loans to be banned officials from Consumer Focus said: ‘These products are controversial, but we don’t agree with calls for them to be banned. Outlawing payday loans could leave some borrowers vulnerable to illegal loan sharks. Instead we need sensible safeguards now to stop borrowers becoming dependent on this high cost credit and prevent even more stringent controls being needed in the future.’

Tags: loan, concern, rate, help, borrowing, debt

Exercise caution when looking for a non-traditional loan

These days many people are looking to get finance or credit of some sort, but because of the difficult financial climate and the increased caution being exercised by lenders many are finding it increasingly difficult to get the finance that they need.

As a result of this there are many borrowers that are turning to less traditional means of getting credit or raising finance, and whilst some of these options can prove useful and helpful for consumers industry officials have warned that caution should always be exercised to ensure that the deals that are available are fair and affordable.

There are a number of options available to those that need to get money but cannot afford to get credit from traditional lenders. However, before jumping in and taking up one of these options it is important for consumers to consider the cons as well as the pros, and to ensure that they are not getting ripped off as a result of the transaction.

One of the options that people might use when they are unable to get traditional finance is a payday loans company, which offer short term loans to tide borrowers over until payday. The APR charged on these loans can be very high. However, most will charge a fixed fee such as £10 per £100 borrowed and if you are only borrowing over a short period this may be an affordable option. Most do not carry out credit checks either, although proof of income must be provided. If you are considering a payday loan make sure that you check a few and compare the fees and charges so that you can get the best deal.

Another option that many people might look at is to get cash for gold, with a plethora of advertisements trying to tempt consumers to send in their gold jewellery in exchange for cash. However, many reports have claimed that the consumer often only gets a fraction of the value of the jewellery when doing this so you need to make sure that this is a viable option for you and don’t let yourself get ripped off over how much you are paid for your jewellery.

Finally, many people that cannot get mainstream finance may be tempted by doorstep lenders, and more worryingly loan sharks. You should bear in mind that with doorstep lenders you may be charged an extortionate rate of interest, which could be financially crippling. When it comes to loan sharks you should always avoid them and look at alternatives, as these are unregulated and often unscrupulous lenders, and you could end up in very hot water by borrowing through them.

Tags: traditional finance, difficult financial climate, mainstream finance, finance, credit, rate

Charities want banks to extend offer of services

A group of charities is urging banks in the UK to extend who they offer their services to, with officials from the charities stating that millions of people are being excluded from using banking services. Read more

Tags: overdraft, basic banking services, Better Banking Campaign, Payday loan, Credit card

Banks urged to provide services to those that are excluded

A group consisting of charities and local groups is urging banks to extend their services to those that are currently excluded from a wide range of banking services, such as current accounts, basic bank accounts, credit cards, loans, and overdrafts. Read more

Tags: interest rates, quarter, bank accounts, overdraft, Credit card