Payday loans – friend or foe?

18 May

It’s hard to look at a newspaper or magazine article nowadays that doesn’t have something bad to say about payday loans.  Whether you are reading online or from a crisp paper copy in print, the message is the same.  They all seem to be saying the same old thing.  ‘These loans should be avoided at all costs’ ‘Interest rates are horrific’ ‘these companies are just after your money’ etc. etc….

But have you ever wondered if these payday loans actually deserve this bad press?  Call them what you will – quick loans, short loans, payday loans.  We are all advised to keep clear.  In fact the message would seem to be do anything and everything with your finances, but not this!!  Run up your overdraft, max out your credit cards. Lose a total track of how much borrowing you have, what your monthly payback sums and keep applying for more credit cards and shuffling your money from card to card.  Apparently that is OK to do.  But is that just because that has been the norm for some time and it is what people are used to?

Stop for a second and take a look at websites like https://Wonga.com  Approach it in an open-minded way and forget the negative focus that the media have given you.  This is what I did and I was pleasantly surprised.  For one thing, if you do borrow money this way, you have to fix a date when you will pay it back.  No way round it.  You cannot take if you are not going to give back.  Yes you can borrow up to £400 but never for more than a month maximum.  Choose your sum of money, select your date and see immediately how much interest it is going to cost you. There is usually a small transfer fee included too.  And this is it.  Nothing more nothing less.  Extremely simple and easy to use.

The positive thing about borrowing money like this is that it is hard to build up a big debt.  If you are silly enough or forgetful enough to not repay the sum back on the given date, you will be in trouble.  Additional interest will then start to accrue and default charges may be applied. But you will know this.  Wonga will text you, email you in fact do whatever is necessary to remind you.  If you still decide not to pay it back, then you are playing Russian roulette with your credit rating and wasting money on extra charges.

But this should not be the case.  Borrow it, note down the date, and pay it back.  Keep to that simple formula and you will have no monthly statements to worry about, no regular monthly payments on cards, no bottomless pit of spending that encourages you to go up to your maximum credit level without giving it a second thought. Spending on cards and overdrafts can be done thoughtlessly and it is the lazy option.

With sites like WONGA you have to make a conscious decision to borrow the cash.  It’s impossible to go through the step by step process without doing so.  And that is what is good about short term loans.

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