What are the dangers associated with payday loans? Is it worth the risk at Christmas?

20 December 2013 - Which Way To Pay

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What are the risks associated with payday loans? The truth behind Payday Loans this Christmas

Payday loans are a good way to help you pay any unexpected bills if you find yourself unstuck before the end of the month or indeed Christmas, however, what are the risks? Below we look at the truth behind payday loans, and how to spot the pitfalls.

What even is a payday loan?

Payday loans are short term loans designed to help you make any unexpected bill payments until your next payday. You can usually borrow as much as you would like up, normally up to 1,000 over a period of 30 days. You can apply online and usually the money is wired into your bank account within 24 hours. Watch out if you extend your payday loan beyond 30 days, you might incur some ghastly fees.

Payday loans and what do you need to be aware of?

Simply - the rate of interest. Payday loan providers charge excessive interest rates compared to all other types of borrowing. There is no other type of borrowing which has such a high APR interest rate making it an expensive form of borrowing.

It is so easy to roll your loan from one month to the next, making the amount you need to repay astronomical. If you do not make the repayments in full after your payday you could find yourself in terrible financial trouble.

Before you apply for a payday loan

Before you apply for a payday loan, ensure you have assessed all the other borrowing options available. This form of borrowing should be your absolute last resort. If you are in any doubt then always seek independent financial advice.

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