Payday loans have become a popular source of income ever since they entered the UK market in 2006, so much so that the industry in the UK is now worth over £1 billion. However, just because this type of loan is popular does not mean that it will necessarily be suitable for your needs. There are many factors to consider first.
+ A big reason why payday loans are popular is because the industry is largely unregulated at the moment. This means that unfortunately the loans are being abused by customers who end up in a tricky financial situation where they are unable to repay the loan. There are a number of reasons for this, which if the industry was regulated probably would not be an issue. These are:
+ Payday lenders do not run credit checks therefore loans are given to people who do not have the financial capacity to repay them
+ There is currently no limit on the amount of time a loan is ‘rolled over,’ which means postponed until the following month. Unfortunately this is very costly as it costs at least £25 for every £100 borrowed, which quickly mounts up the debt.
+ There is currently no limit on the number of payday loans that a consumer can apply for. This means that some customers have up to four payday loans which they are unable to repay because of the high rates of APR.
However, if used properly then guaranteed payday loans will absolutely suit some people. The golden rule is to adhere to the terms and conditions and ensure that you can afford to repay the cost of the loan with the additional interest, as this will mean that you are using them in the manner in which they are intended. This means that if you need a loan for a short period of time, between 14 and 31 days for an amount between £50 and £1000 for a cash emergency, then payday loans are a good solution for you.
You must be realistic with yourself about your spending habits as this sort of loan will only work if you are one hundred per cent sure that you will repay it by the deadline. If you do not and you rollover for any reason then you will accumulate more debt and it will be more difficult to repay in the long run.
Guaranteed payday loans will suit some people who are largely responsible with money and simply need an emergency injection of cash until next payday. Providing these loans are repaid by the agreed date, any customer who fits this profile is suitable for this type of loan.