For and Against Cash Advance Loans
While payday loans have long been popular in the USA, they are a relatively new arrival for United Kingdom borrowers, and a lot of people aren't certain just what they are. Regarding all the furore over whether or not they're a legitimate service or merely a form of legally accepted scamming, it's a good idea for any GB resident entertaining applying to know exactly what they're signing up for.
A lot of us run out of funds when nearing the end of the month to some extent, and have to cut back a little by trimming down on socialisation or other forms of unessential expenditure. This is an absolutely normal (if irritating!) fact of fiscal life for most of us who are working and receive our wages every month. Sometimes however, running out of cash can be more severe than this if there are crucial expenses to be paid such as an unexpected bill or repair cost.
Many people utilize the overdraft facility of their bank accounts to give them a bit of a margin when funds are short, but today many people are permanently overdrawn and near their limits, so this may not be an option.
A contrasting fashion of keeping going until your next salary is to make use of a credit card, both for purchases and cash advances. There are various problems with this, not least the fact that credit cards are an expensive kind of finance, and it's easy to build up a large account balance which can have a disastrous effect on your long term financial health.
If neither of the last two choices are the right choice for you you, then a payday advance loan might be worth looking at. In brief, these loans are available to virtually anyone with a bank account and a debit card, and who is in regular employment. When you take a payday loan out, the lender will transfer the funds you ask for directly into your bank account, usually inside a working day of your application being sanctioned. During your application you will have provided your debit card details, and the loan issuer will use these to automatically pay back your loan on your next pay day, as well as their charges.
And therein lies one of the essential problems with wage advance loans – the fees.
This kind of credit is notorious for being expensive, and staggering APRs of 1000% or even much higher are perfectly normal. These interest rate figures are perhaps a little misleading, as the APR system is designed for credit with a longer repayment period than pay day loans where the term is measured in days rather than years. Nonetheless, these loans are pretty high-priced, with a cost of 20%-2% of the amount you borrow mostly the going rate.
The next serious drawback is that repaying your loan and fee is likely to result in you being moneyless once more at the end of next month, and it's all too easy to get into an expensive downward spiral of applying for a loan every month – which is when those high APR rates will really start to have an effect.
So, is there any point to a wage day loan? Of course, but only in truth for an authentic crisis where there isn't an alternative. If you're relying on cash advances to finance your day to day life, then it would be a better idea to examine your budget and see where you can save money, or to reconstitute your debt using a consolidation scheme or similar to set free some extra cash every month.
Martin writes for a fast payday loans provider in the UK, and you can read more about the pros and cons of wage advances at his site as well as applying online.