Pay Day Loans
Over the last few months I have come across a lot more pay day loans than usual — people utilising them for whatever reason. Be it to pay a bill, make a purchase or just to get through the week.
Based upon this, I thought I would put together some information on this and help explain why they are such a bad idea!
These pay day lenders, which I won’t name, lend you money at an absorbingly high interest rate; then allow you to either clear it with your next pay or make installments out of your next few pays. I have seen interest rates for these facilities at up to 50% per annum — but sold at 4% per month.
The problem with this is not just the interest rate, but it seems that once you get into this system, it is quite difficult to get out of. With people finding this as the easy “band aid” solution and repeatedly borrowing money from these lenders.
I understand that everyone gets short of cash now and then. Though the thing to remember here is that once a reputable lender sees one of these pay day lenders on your Credit Report — they do not want to proceed. Be it for house finance, car and asset finance or even a simple credit card. A pay day lender on your credit report simply reads as someone that cannot manage their income and expenses. Further — is living outside of their means.
The best thing to do if you find yourself needing cash is to ask yourself — “Do you really need this??” OR “Is it a want??” In the latter situation — wait until you have the money. You will most likely find that the “want” feeling will pass. If it is a need, try and seek another option — lend from a family member or friend.
However, the best option is to speak to your advisor or finance specialist and see if there are other ways around it. They can also hopefully assist in your budgeting and cash flows and see where things are going wrong. Sometimes a small tweak in your financial world can make a massive difference. Thus, leading us back to two of my favourite financial rules:
1/ Spend less than you earn
2/ Borrow less than you can afford
It may take a few weeks to get back into rhythm, however once you can master less outgoing than incoming — there is no real need to borrow at high rates and condemn your credit file for the next 12–24 months.