Much has been said about the interest rates associated with payday loans, with some critics of the payday loan industry going to the extent of accusing payday lenders of usury. While it is true that payday lenders do charge a high rate of interest, they are vastly preferable to other sources of credit which can leave your finances in utter disarray.
Imagine this: You are faced with a financial emergency in the middle of the month and you don’t have the funds to deal with it. You are nearing the overdraft limit on your bank account, and you know that you can recoup your expenses when your next payday arrives. Getting an unauthorized overdraft to cover your immediate expenses is a fast option, but it is also a very, very expensive one. According to recent reports, major banks in the UK charge an average fee of £28 if your account becomes overdrawn without any prior arrangement. In addition to this, they charge an average of £30 for each day on which an unauthorized overdraft occurs. Add these values up, and the sum you get is mind-boggling!
Credit cards are another source of credit that Britons rely upon to cover for unanticipated expenses, despite their high interest rates. Statistics reveal that the interest rates have increased by over 2% points to more than 18% in the last two years, despite the Bank of England’s base rate dropping to an all-time low. A study by EuroDebt has revealed that more than a third of all unsecured debt over the past 18 months was run up due to credit card balances.
When compared to such eye-watering amounts charged in fees and fines, an interest of £25 on a payday loan amount of £100 for a period of 1 month is a pretty reasonable deal, especially when you take into consideration the fact that a payday loan does not require any collateral. It is a small price to pay for securing the funds you need within a day, even with a bad credit rating.
Did you find this post useful? We would love to hear your comments.