All across the world countries and national governments are currently grappling with the problem of bringing down the debts of their countries to a normal level and to find their place in the new economic reality after the recession and global credit crunch. As they do this many people and many families are also beginning to feel the pinch and are realising that they are going to have to make some serious cuts to their own family budgets and household expenditure. In addition for most families the time has also come to start paying back many of the debts that were building up when times were good. However, the problem with this scenario is that at a time when they might be thinking about drawing in their horns and clearing their debts a lot of people are now seeing their salaries reduced, the cost of their shopping rising and the cost of petrol at the pump sky rocketing. All of which makes it harder than ever not just to clear old debts, but also to prevent new ones from accruing. One way many people try and keep their heads above water is by taking advantage of payday loans but this article will show that this is only an option you should take when every other avenue has been explored and when you are certain that the company offering the loan is one of the decent ones.
A great many people use payday loans in their management of finances when they get a bit behind and if they are used wisely then they can be quite useful. But, there are also thousands of companies out there who use payday loans as a way of charging people exorbitant interest rates, often as high as 2000% APR and that is why payday loans are seen as an extreme loan choice and really only for those to whom other more reasonable credit options are no longer available. This is because they work by charging people higher interest in return for offering them small amounts of cash for periods of time as short as a week or a month.
The average payday loan will be for something between £50 and £500 and will be due for repayment within the following month. The company offering the loan will probably charge something like £30 on every £100 that is borrowed for every 31 days that it is borrowed. Put like that it does not sound that bad, but if you work it out over a year such a deal would come to a staggering 2255% APR. This is why payday loans can arguably be seen as a useful short term solution to access in an emergency but must never be taken without the knowledge that they can be paid back straight away. If you were to get behind with a loan of this time you would quickly see your debt spiralling out of control, so it is extremely important to ensure you have budgeted the cash to pay back the loan within the set timeframe.
Of course there are other, better alternatives. Don't even think about taking out a payday loan if you have room on your credit card for a cash advance or if you have an overdraft facility ready and waiting at your bank. Credit cards also charge high rates but again, if you pay it back within the month, it will work out as less interest than a payday loan. If you can get money through your overdraft then you will pay far less interest and you will probably have longer to pay it back, so speak to your bank before you do anything else.
Loans such as payday loans are useful, if handled well and if you have checked that the company offering the loan does not charge unfair rates. If not, they will almost certainly make your debt problems even worse and you should steer well clear of them.
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