It’s been a long time coming but at last the government is taking action on payday loans and has decided to introduce a cap on the cost of these loans. Costs and interest charges on many of these loans can be extortionate and there has been concern raised by consumer groups and debt advice organisations on the regulation of this type of loan and the debt problems they cause.
What is a pay day loan?
Payday loans are sold and marketed as a simple solution to help people pay bills and other expenses until their wages or salaries hit their bank accounts. However evidence has now shown that they are anything but simple with huge rates of interest, costs and draconian default penalty fees. Consumers using these so called short term loans can find themselves easily trapped in a cycle of debt which can quickly drag them into deeper financial problems.
Best advice on payday loans
Although it may seem a case of easier said than done, the best debt advice on payday loans is to avoid them. If you already have one try to pay it off as quickly as you can and do not take out another one. It is important to avoid the potentially dangerous cycle of taking out one payday loan to pay off another. Consider all the alternatives available to you.
There’s a range of alternatives available to you that you should try first:
- Contact your local credit union who you will find through the Association of British Credit Union. They provide loans and credit options that are simpler and almost certainly cheaper.
- Cut back on your spending. This is a simple but often overlooked course of action that can often help in the short term.
- Think about selling any unwanted items you may have. It’s so much easier now with the help of the internet and sites such as Gumtree and eBay.
- You may find it difficult but asking friends and family for help can provide that short term assistance that may negate the need for the loan altogether.
You may also find that a combination of the above alternatives can help resolve the problem. The key is to avoid taking out the loan at all.
Debt advice and help is available
If you are experiencing debt problems through payday loans then you should seek the best debt advice you can as soon as possible. There’s a variety of debt advice organisations who will provide immediate debt help and advice to help your problem and show you the best way to take action.
It’s important not to wait and hope that the problem will resolve itself as it generally never does. In fact the evidence is that the longer people wait the worse the problem can become.
Try to avoid incurring more debt, particularly expensive debt, in order to pay off your current debt problem as this is often a short term fix that doesn’t get to the root of the problem and can be the start of a debt cycle that leads to more serious problems.
There is also a Government guide on options for paying off your debts which you may find helpful.