What's wrong with payday loans and short-term credit in the UK?

In the past, only banks used to grant loans but gradually many private lenders emerged. Also, a new form of loan named as ‘payday loans’ have been introduced.

It has been expected that slowly and steadily the ‘payday’ loan will occupy the market and will attract more than average number of customers.

A research by the Insolvency Trade Body R3 shows that 60 per cent of the people who have taken a payday loan regret the decision, whereas 48 percent believes that it has worsened their financial situation but the rest are satisfied with it.

Man people under debt are extensively taking payday loans to pay off their interests while their debt amount remains the same.

The same case has been noticed by the people repaying their credit cards. The credit card customers keep paying the interest and the actual debt amount remains intact. Such people have been identified by a new term called ‘zombie debtors’.

The payday loans are not designed in such a manner to help resolve the debt problem. Those who tried using the payday loan to pay off debt have failed and it has worsened their financial condition more.

Whilst, it’s true that whoever owing a debt will be unable to make any sort of savings. It is always recommended to clear your debt as soon as possible with the help of a professional financial advice and try to avoid a short-term credit with a higher interest rate such as a payday loan.

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