Why are Payday Loans Bad in the UK?

Why are Payday Loans Bad in the UK?

At some point in most people’s lives there is going to be the need for quick cash. Whether your car broke down or you have an unexpected medical bill to pay, sometimes a payday loan sounds like a great option. It is necessary to know as to, why are Payday loans to understand the actual benefits.

However, before you head down to the 3 month payday loan shop, you should understand some of the pay day loan dangers that come with this type of loan and why they should be your last option when it comes to getting the cash you need.

Why are Payday Loans Bad in the UK?​

An unpaid payday loan can affect your credit score

Many people have the misconception that payday loans and mortgage loans do not affect their credit score, however this could not be farther from the truth. Just as with other forms of debt, if you fail to pay your payday loan in a timely manner, not only will you owe more, but your credit score can be affected.

Some individuals who take out multiple payday loans a year and fail to pay them back in a timely manner can dramatically decrease their credit score.

Finance charges can be High

Similar to the way in which interest works, finance charges vary based on the payday loan you seek. Based on every $100 that you intend to borrow you will be charged a fee. 

These fees can be as high as $30 for each $100 that you borrow, not to mention if you have not repaid the loan by the end of the designated term, those same finance charges are charged once more. Some payday loan companies will charge less, such as $15 per $100 borrowed, so it would be wise to ask about the charges from multiple payday loan locations if possible.

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The Payday loan terms can vary based on the lender

While most lenders will offer a loan term period of two weeks, this amount of time can vary across payday loan companies. You definitely need to be sure that you understand all of the terms that are associated with every loan you take out, especially if you are working with different payday loan companies.

Payday loans leave with more debt

The payday loans leave with more debt because of the high finance charges and the short terms for payday loans, many individuals find themselves overwhelmed with this debt and can never seem to pay it off. 

The more time that goes by, the more you will pay in finance charges, more so than with traditional loans or even credit card loans.

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Conclusion

While payday loans can be an answer to the need for fast money, it is important for anyone who is borrowing money in this way to understand all that goes into these types of loans and that it is not cheap. 

If you need cash fast, it is wise to make either payday loans or debt consolidation loans your last option and only if you are certain that you can repay the loan quickly. Otherwise, these loans can be more dangerous than mortgage loans.

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