Payday loans have increased in popularity over the last few years, as prices of just about everything has gone up, whilst wages have either been frozen or rises have not kept up with the rate of inflation. Payday loans are the new breed of loan in which you can obtain cash from your next paycheck, but not from your employer, from a lender. The cash is usually deposited into your account the same day, in fact Wonga.com manage frequently to credit accounts within 15 minutes. The good thing about payday loans is that people with less than perfect credit histories can typically apply and get approved as the lenders do no require a credit check, they rely instead on taking your debit card details.
So if you have late payments, payment defaults, CCJs and arrears, you can still be successful in obtaining a payday loan. However, what has happened recently is that by the time the applicants payday has come around, they sometimes do not have the money to replay the whole of their loan. This has led to changes in how lenders now operate, and as some clients were finding they were caught up in a never ending spiral of only paying off the exorbitant interest, they could never fully repay the original debt. Lenders can now only extend payments for a certain number of times, as it is this process that continually adds the interest back onto the debt, without taking any away from the original sum borrowed.
In response to this financial phenomena, a new type of payday loan has emerged – the six month payday loan. Which, as it sounds, is a quick, cash loan, with no credit checks, that you can pay over six months. Sounds good? Well, not necessarily. In researching for this article, I visited over ten websites that offered six month payday loans and nowhere, and believe me I looked very carefully, nowhere could I find exactly how much interest you pay on this type of loan. There was no typical APR, no representative example, only where to apply and how easy it was to obtain the money. Surely this is against financial regulations? And if these loans are such good deals, why can’t we see the interest that we would expect to pay?
So yes, if you have an emergency and your only solution is a six month payday loans, then by all means apply, and don’t let the fact that they say there will be no credit check encourage you to accept any old offer. Remember, none of these types of loans carry out a credit check. I find it very suspicious that none of the websites I visited declared the interest or the APR up front, leaving until you actually apply before they tell you. Then, once you have the agreed application in front of you, and the prospect of a few hundred quid in your account in 24 hours, the temptation to just accept is very powerful. This is considering that we are talking about people who are usually desperate for money and cannot borrow from typical methods.
If you find yourself in a financial emergency, ask your family first, they may be able to help you. If not, are you entitled to any government benefits that you are not claiming? We suggest using payday loans as they were first supposed to be used, as a temporary measure to get you through one month, and not take out a lengthier loan that may carry on far beyond the six month period. Remember, if you are having difficulties repaying your payday loan, call the lender to try and come up with an alternative payment solution.