So you find yourself in a little bit of a financial bind. Your payday is two weeks away and your car needs 2 tires. Without your car you cannot get to work so this is an emergency of sorts. Since you live paycheck to paycheck you have no savings to fall back on. You only need about £200 but you have nowhere to turn to get it.
Your credit cards are maxed out and there is no one you could borrow it from. Your credit rating is such that no bank is going to give you a loan. So you turn to the pay day loan industry for help.
You look online and discover that you can get quick cash loans online very easily. You don't have to provide the loan company with a lot of documents and information. They won't check your credit so you don't have to worry about how low your rating is right now. They won't bother your employer so you don't have to worry about the employer knowing your financial situation. The final good news is they will deposit the money into your bank account with 24-48 hours. Sounds like a great deal. So what could go wrong?
So many consumers are now taking advantage of this option in the UK.
But are they considering the real cost of this easy to get loan?
If it is so easy to get than the loan company is taking a very big risk. When any company is carry a lot of risk you can bet they are passing on the costs of that risk to the consumer. Thus the no faxing instant cash loan that carries high interest rates of anywhere from 200% to 4000%. 4000%??!! Is that legal? In the UK yes it is.
So you decide to borrow that 400 pounds for 30 days from Cushtee Cash that charges an APR (Annual Interest Percentage) of say 300%.
Your loan will cost you £100 plus any fees. So 30 days from now you will owe the loan company £500. If you "roll over" the loan for another 30 days this amount will be compounded and additional fees will be added.
So after 60 days your £400 loan could be costing you upwards of £700-800. This is a scenario for disaster. So if you are going to use payday loans be sure you know the "real cost" and be sure you are prepared to pay it back within the first contract period.
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