Payday loans could further worsen your financial situation

Today, almost 3.5 million adults are not able to manage their finances properly and they are willing to take payday loans in the next 6 months in order to meet their expenses.

A large number of people run out of cash before the start of the coming month.

Some Payday loan companies are taking advantage out of people’s such worrying financial conditions and they are charged an interest rate even to the tune of 4,000 per cent.

Payday loans are short-term unsecured loans and availed mostly by the people who face a cash-crunch at the end of the month.

If this small loan amount is paid back by the debtor within the stipulated period, it could be proved cheaper than credit card borrowings or an overdraft arrangement.

But if the payday loans do not pay on time and allowed to roll over, the debt amount can rapidly escalate with a steep interest rate of 1,000 – 4,000 per cent.

This is the reason why payday loan companies have a spiraling business of over £2bn a year.

In a recent study, 60 per cent people regretted their decision of taking payday loans. 48 per cent people had their opinion that these short-term loans further worsened their financial situation. There were only 13 percent people making a positive opinion about payday loans.

However, industry experts are raising their concerns over people’s tendency of opting for high-interest short-term loans. They think that instead of taking payday loans to meet their monthly expenses, people should focus on long-term financial planning.

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