The fast growing online services trend nowadays, has invaded quick payday loans as well. Payday loans gives you fast and efficient loans in just a few clicks, provides you with the same services in less time than the usual manual processing. And then there is the retail lending type where you have to enroll from a payday lending store and fill up applications manually.
It is a convenient way to access a small sum of money for a short time-frame, this loan usually ranges from £50-£1500 and it is repaid upon the borrower's next payday. The people in UK engaging with this type of loans has increased by 241% during the last 4 years, from 1.2 million (2006) to 4.1 million in the year 2010.
Typically every £100 borrowed will cost you £20, meaning to say it will cost you £120 if it is repaid the next month. The loan money will be deposited in your bank and the repayment will be debited from your next paycheck using your debit card number.
Consumers with not-so-good credit scores aim for payday loans because policies are far more lenient than traditional loans. Common reasons as to why an individual resorts to payday loans when unexpected expenses arise include: car repairs, emergency travel or monthly bills. Some factors to consider, when you have additional and unanticipated expenses, payday loans are a good remedy because it is instant cash, hassle free, time efficient and confidential.
Instant payday loans offer great rates that makes financial sense, the payment method is flexible and there is no need for collateral. The repayment will come from your next paycheck which prevents you from visiting the nearest pawnshop. There is a sense of security because it gives you that "lending money from a friend" feeling. Surveys says that 80% of applicants are approved which proves fast approval.
On the downside of this easy-access loan, it has been a major target of criticism in UK. Vince Cable MP said "The growing popularity of these kinds of short-term loans highlights the problems stemming from the credit crunch and unsustainable levels of personal debt in the UK".
The problem with these payday lenders is the fact that it exploits the people's financial hardship for profit. For people with low paying jobs, who enroll in payday loans as an alternative to receive cash instantly, often get stuck in a "debt-cycle".