If you’re experiencing difficult debts, confusing credit cards or inscrutable ISAs, then our economics expert is here to help. Why not write to OurExpert@CreditChoices.co.uk
Andy Williams is our Online Savings Expert at CreditChoices.co.uk and can assist with all monetary matters no matter how big or small, from piggy banks to re-mortgaging and beyond.
On the subject of Payday Loans, our expert says:...
Hi Neil…..
I have three words for you: avoid, avoid, avoid
I hope I made myself clear.
Payday loans companies operate with annual interest rates of anything up to 2500%. Most payday loans providers will charge at least £20 for each £100 you borrow, many raise that fee to £30. Additionally, should you be unable to pay the loan back within 31 days, and this is a likely scenario given your financial circumstances, an extra charge in the region of £60 will be levied in late fees.
Payday loans companies are banned from a number of US states, and looking at the figures above you can surely see why. Unfortunately, these companies are now working from offshore locations and targeting vulnerable UK borrowers.
Don’t even go there.
Let’s look at some alternatives.
Savings
One advantage of the credit crunch is banks’ new found enthusiasm for rewarding savers, and although you may not be in the position to start putting money away just yet, it’s definitely an option to consider for the future. Right now, financial benefits are there to be taken advantage of.
In the meantime, contact your local council and see if you’re eligible for low income benefit or a council tax rebate. Either of these could help reduce your monthly outgoings.
Borrowing from Friends and Family
Going cap in hand to your friends and family is far from an ideal state of affairs, but when compared to 2500% APR it seems a pretty favourable option.
Try to swallow your pride and ask for financial support from those around you. They may be more willing to help you out than you think, and they certainly won’t be sending the bailiffs around after 31 days like many payday loans companies.
Advances on your Wages
Similarly, your employers may be able to help you out by either changing your pay date or supplying you with an advance on your wages.
I would only recommend this course of action to those who share a long standing and deep rooted relationship with their employers.
Overdraft
If you’re not already in possession of a working overdraft on your current account, apply for one from your bank today. This can be easily arranged over the phone.
Should you already have an overdraft assigned to your account, ask your bank if they will consider extending that overdraft temporarily, just to tide you over until you get paid.
Provided you refrain from borrowing beyond your agreed overdraft limit, overdrafts are a convenient and relatively cost effective way of borrowing extra funds. Remember, you are borrowing money from the bank, so don’t go crazy.
Payment Plans
Impartial organisations such as Debt Free Direct can negotiate payment plans with creditors on your behalf, allowing you more manageable repayment terms and expert advice along the way.
