Payday loans or paycheque loans are short-term loans that you get in return for your pay cheque. They are basically cash advances on the salary you are expecting and are available online and on the high street. Some of the companies offering these loans claim that they are fast and simple, with no paperwork or credit checks.
Although this type of lending can help people when they need access to cash before they get paid, it is vital that those applying for a payday loan remember that this type of lending is only suitable in the short term. Falling behind with repayments or spreading out repayments means you could be hit with incredibly high APR rates. In fact, it’s not uncommon for some of these companies to charge APR rates of more than 1,000%, which means you could repay much more than you originally borrowed.
Before using this type of borrowing you should always check out whether there are any other alternative methods available to you. You could speak to your bank or building society in the first instance to find out if you could add an overdraft to your account or extend your overdraft to cover you until payday and arrange for them to reduce this amount back down when you get paid.
If you have no alternative to a payday loan, then make sure you fully understand the costs and charges and try to make sure that you do not borrow for a day longer than is absolutely necessary.
Baines and Ernst Ltd