Should you take out a payday loan?

The demand for payday loans is ever increasing with over 3.5 million people expected to take one out in the next six months. (Source www.r3.org.uk)

From a related report from R3 (The Association of Business Recovery Professionals) debt worries also appear to be on the increase:

“…nearly half of people (46%) say they struggle to make it to payday – an increase from 44 percent in the last quarter.”

Interest in the short term loans has doubled in the last 12 months with many consumers turning to them to pay for shortfalls in wages or an unexpected bill.

Source: Google Insights – term Payday loans United Kingdom

But what are payday loans and what should you keep in mind if you’re thinking of taking one out.

A payday loan is a small amount of money, normally less than £1,000, that is leant for a short term, typically a month or so hence the term payday loan as most are paid back once the customer has been paid again.

Although the interest rates are much higher than a typical personal loan (some as large as 4000% APR) they can sometimes work out much cheaper than the interest rates and charges that you can get from a credit card company or your bank account say if you go into an unauthorised overdraft.  However if you fail to pay the loan back on time then the interest rates can quickly mount up.

They also have no affect on your credit rating making them a great short term option for those who struggle to get credit due to a poor rating.

But if you are struggling with your finances it is always a good idea to take advantage of any free advice you can get before you sign up. There may be other options available to you to help in the long term as well.

• The National Debtline is a great place to start if you have money worries; they offer free financial support to people in England, Wales and Scotland. You can call them free on 0808 808 4000.
• Citizens Advice Bureau is another worthwhile place to turn if you need help and advice. Check their website http://www.citizensadvice.org.uk, call them direct or pop into your local bureau.
• Consumer Credit Counselling Service gives consumers a free and anonymous help and advice with debt problems. They have a freephone helpline 0800 138 1111 plus a website for more information www.cccs.co.uk.
• Speak to your bank. You may feel that they don’t want to help you but sometimes being honest with them before a problem spirals out of control can let them help you before things get worse. Your local bank can help you organise your finances and highlight ways of getting your account back under control.

So our top tip before you go ahead and say yes to a payday loan is to do your research, get yourself informed and check out what the various deals mean in detail.

Remember not to go for the first deal, get details of a few, make notes and compare before returning to confirm the deal.

Check out our wide range of payday loan reviews here on Review Centre. You can find out what people actually thought of the loan process and also discover how good their customer service is plus lots of other helpful information before you sign up.

Make sure you are familiar with things such as interest, how much you will actually end up paying back and read the small print to see if any charges apply if you fail to pay back on time. Remember the more informed you are the better the possible deal you could get.

If you’ve had a good or bad experience with payday loans we’d love to hear your experience. You can comment below or leave a review.

Review Centre does not accept any responsibility for any loss, damage or injury that may arise from using the information on this website. It is your personal responsibility to confirm the accuracy of the information on these pages before you take any action based on this information.