Out of all the debt services that are available, payday advances or payday loans are the worst of the lot.
I'd always known that they weren't the cheapest way to borrow money, but the other day I found out just how bad they are.
While promoting this site, I was contacted by someone from a payday loan debt services website. They wanted to exchange links. I did all the normal checks and found that their links page was PR5. A link from that would certainly help to promote my site.
But then I took a look at what they were offering. Would it genuinely help the people who visit this site?
So I did a bit of research. And most of the sites that I found offered the same type of deal. Some charged 15% per $100 borrowed, while other sites charged 20% or even 25% per $100.
And at first glance these figures don't seem too steep. . . until you read more about the offer.
In general these are the amounts that are charged every 7-21 days. So you borrow $100 and when you repay it say 14 days later you owe $125. If you don't repay it then after another 14 days another $25 would be added to your debt.
But if you were already hard up before you took the loan, when you do get paid, you'll have to repay the loan plus the extortionate interest. The chances are that your income will be used up and you'll be short of money once again. So what do you do? Take another loan to “tide you over" and make your financial situation worse.
Just look at the APR on these payday debt services. In most cases, they start from 300% APR.
In one instance, the APR reached 1200%.
In other words, of you borrowed $100 they would want $125 back 7 days later.
Extortionate! (In fact, with interest rates the way they are these days, any loan that costs more than 20% APR is extortionate)
These sites will help people, but only if they want to push themselves closer to bankruptcy! So it goes without saying that I will not be linking to their type of debt services.
Now at times when you're really short of cash, you might have considered using the debt services offered by payday advance companies.
But they should be avoided at all costs. Don't do it! These services just exploit people who are in a bad enough financial position to begin with.
So look for another way around your problems. Almost any other solution will be better.
- Have you got any limit free on your credit card?
- Could you get the limit increased?
- Could you get another credit card? (Yes, seriously, payday loans are so bad that this is a preferable route).
- Could you get a bank overdraft or extend an existing overdraft?
- Do you have anything to sell?
- Could you do anything to earn extra money?
- Could you borrow from friends or family?
- Could you ask your employer to pay you early this month/week?
- Could you increase your mortgage?
All of these options are worth considering just to avoid one of these extortionate loans. But if you take one of these routes promise yourself that this will be the last time that you get into such a bad financial situation. It's a warning sign that you need to look at your debts and work out a plan to reduce the amount of money that you owe. Otherwise next time one of these payday loan debt services might be your only option. And that would be the beginning of the end.
by Stuart Laing
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