The loans which are given for a very short period of time like a week or the time until the next salary are called payday loans (Explore a brief guide to personal loan). But the catch here is that these loans are given at an unexpectedly high rate of interest. This method of lending is basically designed for supreme urgency only. Most payday loan providers charge up to £30 for every £100 cash loan borrowed for a period of 31 days. When counted in terms of APR (Annual Percentage Rate), this equals to 2,255% which is flabbergasting.
It is a not a wise thing to borrow money at such a high interest. The calculated rate of interest is much higher than any other form of credit. And the pay back turns out to be a whopping figure. But this is a very big price paid for not going to a bank or choosing another form of credit. Even a small amount borrowed gets turned into an inflating and expensive amount when you return it. The dreaded danger of not paying the amount may result in a big debt. One should first check the affordability factor of borrowing money in this manner. If you cannot pay back then the interest becomes manifold and results in you being left helpless.
Many blame these kind of loans as a reason for their debt. When you are a victim of this kind of debt then it becomes next to impossible to get out of these. Choose them as a last resort and avoid as much as possible. Try better alternatives as any other form of credit would be cheaper when compared to this. If poor credit is the reason behind opting for payday loans then hang on as there are other solutions to the problem of bad credit. Talk to your credit provider and find other ways out.
What is an alternative solution for payday loans?
There are many other solutions to replace payday loans. People with bad credit history can also think of other solutions that are cost effective and affordable in the long run. Try the following methods:
Authorised overdraft: You should talk to your bank about facilitating an authorised overdraft. If they agree then you can take the small loan from your bank as an overdraft. Make sure that it is an authorised one as unauthorised overdrafts are again expensive. Still, when compared to payday loans any kind of overdraft is an affordable solution. When we do interest comparison between overdraft and payday loans then the figure in the first case equals to around 15-30% while in the latter it turns out to be 2000% which is an insane number. So, avoid payday loans.
Guarantor loan: APR of a guarantor loan equals to 50% and so, it is much cheaper than payday loans. Moreover, these loans are a convenient solution for borrowers with a bad credit score. Another positive side is that Guarantor loan companies offer good credit deals to borrowers as there is a guarantor associated with them. In case of delayed payments or no payments, they can just catch hold of the guarantor and get back their money. For this reason, you need a guarantor who has a good credit history so that he can back you up if the application falls into scrutiny.
Check credit cash advance: Normally, it is not advisable to go for credit cash advance as withdrawing money through credit card incurs high interests. When looked in terms of APR, this falls between 10% to 30% which is much less than payday loans. If you need money urgently then use this method of withdrawal through credit card.
Try a credit union: It is a good idea to become a member of the local credit union. If you borrow money through these social groups then the APR will range from 12.7% to 26%. Some of the credit unions offer lending service to people who save in their unions. So, better check it at the first instance. Ask the members and find a solution for your borrowing needs. Generally, members have a flexible approach towards lending and so, things can get easy here.
Professional help: Contact debt management companies to find a solution to this problem. They may suggest different ways which are affordable and efficient.
Try the above mentioned methods to find an easy solution to the borrowing issue. Avoiding payday loans is the wisest step. For more details on loans, check freepricecompare.com or call us on 02034757476.