Brits Turning To Payday Loans In Difficult Times

Many cash strapped Brits are considering a payday loan to help make ends meet as the cost of living soars.

Although payday loans have a bad reputation, many consumers are considering turning to them as their personal finances buckle under the rising cost of living.

An online survey carried out by CouponCroc.co.uk, a discount vouchers website, has revealed that over a quarter (28%)of Britons have considered using a payday loans website in the last 12 months.

Payday loans are designed to provide a quick source of cash to tide the borrower over until the end of the month when they receive their paycheck. As the loans are only for a short term, the interest rates, on an annual basis, are generally very high.

Some payday loan companies charge as much 4000% representative APR, and rates across the industry are generally seen as excessive. Moves by some MPs may well force payday lenders to cap the interest rates for this type of borrowing.

Over a third of respondents in the survey said that they are considering selling their jewellery and keepsakes at cash-for-gold websites.

With the price of gold now hovering around $1500 an ounce, this may seem attractive,, however the prices paid by these companies is often far lower than the actual value of the jewellery so this option needs to be considered carefully, as Scott Green, director of CouponCroc.co.uk warns:

“Converting the family gold into cash, or taking out a short-term loan to tide you over until payday may seem to offer the solution to money or debt woes but in many cases will only make the situation worse.”

“”We urge anyone who is considering these measures to seek advice from their local Citizens Advice Bureau or a licensed insolvency practitioner, as a quick fix often hides far more fundamental problems.”

MoneyHighStreet.com Comment: Although payday loan interest rates, are extremely high, as long as you pay back the loan very quickly, this sort of loan can help you out of a desperate fix (paying the rent or mortgage, for example). Payday loan lenders are regulated by consumer credit law, which is enforced by the Office of Fair Trading. If you are desperate, it is far better to use this regulated form of borrowing than turning to illegal loan sharks.

The problems with payday loans start if you do not pay back the loan very soon. Those interest rates will add up alarmingly and you will quickly be in a far worse situation, as Scott Green warns.

If things are very tough, seriously consider speaking to the Citizens Advice Bureau or a debt charity such as the Consumer Credit Counselling Service which provide free debt advice, before taking out a payday loan.