Payday Loans Get Criticised – Again
Personal_Finance / Debt & Loans Feb 07, 2013 - 03:17 PM GMTBy: Submissions
Brent Wayne writes: Payday loans always seem to be being criticised and this time it is because there is a feeling that students are being unfairly targeted for them. A payday loan is an expensive way to borrow because it is aimed at people with a poor credit record, which may mean that they have been in debt a lot in the past or that they have no history of borrowing. It is felt that these people are the ones that are most vulnerable in society and so they should not be being targeted.
Payday loans claim to be filling a gap in the market and providing finance to those in need, where there were no solutions before. This means that someone who cannot borrow from anyone else and who is desperate for money can use this facility. The problem is, when it all spirals out of control.
If a loan is taken and then paid off when due, everything is fine. A person needs some extra money to pay a bill before pay day arrives, then pays back the money. However, the problem occurs when there is not enough money to pay the loan back. This could end up in the person either having to pay fees and having the interest build up even more or they get out another loan to pay for the original one. The first circumstance is bad enough as the debt builds up, but by speaking to the lender, a more manageable payment plan could be worked out. By getting another loan, the debt can easily get out of control as higher and higher value loans will need to be taken out to cover the cost of the loan plus interest. If this was done every month on a £100 loan, within four months the interest could easily be higher than the amount borrowed in the first place.
Payday loan companies (like) have been criticised for not ensuring that their customers have the means to pay back the money before they allow them the loan. This is slightly unfair as most lenders, with the exception of mortgage lenders, do not do this sort of check. However, the loans are aimed at people who have shown they have not got good financial sense.
The blame could be put on the education system though. If people were taught in schools about money and how to budget, then they could better cope with it when they were older. Relying on parents, who have not had financial education, to teach their children is not going to work. Something else needs to be done, to help everyone understand more about the importance of spending money wisely.
Author's Bio: Brent Wayne is a professional writer with a focus on finance and economy. He is currently writing for No-credit-check-payday-loans.co.uk
© 2013 Copyright Brent Wayne - All Rights Reserved
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