It's the thing.

25 July 2013

Payday Loans

Two posts in one day, I spoil you.
Anyway, this one comes from the core. There's nothing I know more than about Payday Loans.

Payday loans are a scam. I'm not just saying that because of the absurd APR.
The APR on a payday loan is irrelevant. It's only at 32145% because they are a short-term loan. Imagine setting an APR of 17% on what is a typical 1 month loan of, say, £100. That's £17 per year. Which is about £1.20-odd per month.

Charging £1.20 interest on a short term loan is not viable for a business. As absolutely abhorrent these businesses are, it's not an evil thing to be charging this much interest. A convenience charge, I tend to call it.

Anyway, I'm not here to defend them, it's just that I tend to see a lot of articles bashing them, then hooking onto the APR as a point.

While it's true that companies providing these loans have a lot of happy customers who can pay back no problem and carry on without borrowing more, there are lots (including myself) who fell into the spiral of borrowing more because money got low again toward the end of the month.

If you are on Minimum wage or thereabouts DO NOT GET A LOAN LIKE THIS! 
You might think "Oh, the interest is fine, I can pay that back no worries." Think a little ahead. I was an idiot and didn't.

I spiraled out of control, and only a few months ago, I decided to seek help to pay these companies back.
I ended up borrowing from 5 lenders, all at around £500 each. I'd maxed a credit card and I'd hit my credit limit, my history was poor (I can't get much lower on the scale, so banks were turning me down for a more reasonable long-term loan.)

When you can't pay them back - your lack of money does not matter. You might be totally broke, but it doesn't matter. "Give us that money or we double your interest" they always said. This is how I ended up borrowing from multiple companies. Borrowing from one to pay another. It's a vicious cycle you cannot escape.

Sure, that "Money within 10 minutes" might tempt you, but be honest with yourself. Do you NEED that thing? Can it wait until your actual payday? If you can wait, for god's sake - WAIT - It's not worth the potential stress these shits can cause.

These companies chase you down. They only turn nice when you actually seek help (In my case, I went to a debt management and consolidation company).
Now I get at least 7-8 e-mails in a week offering 10-20% off the total amount I owe if I pay it back right there and then.

It's nice that they only start thinking of those in serious trouble once they've actually gone to get help. Talk about throwing a lifebelt to a guy already in the rescue boat.