Payday loans may outstrip credit cards

[xoggoth]

mentions the average credit card debt at the moment is £1k

Meaningless figure. It is technically a debt but if it is paid off every month from adequate resources in the bank account it is no different to using cash, cheques or debit card except that it is much more secure due to all the insurances/guarantees. We use them for anything over about fifteen quid.

[NotAllThere]

Did you read the article? It quite clearly states that people who do not have access to traditional loans like credit cards are turning to these pay day loan schemes. They are not using these people because they want to, but because they have no other choice. You may suggest that they should do without, but that would be an opinion based on no understanding of these peoples situations.

Did you read the article? "the convenience and innovation offered by payday lenders are attracting a broader and more prosperous selection of consumers, "

These services would be fine if they never lent to someone who couldn't pay it back quickly. If you need a short term loan, it can be cheaper than any other source of credit. Ignore the interest rates - look at overall cost.

[Support Monkey]

Probably as they've defualted on their CC repayments and have a tulipe credit rating to go along with their 52" plasma from Brighthouse and 2 Xboxes on littlewoods.

Ain't that the truth, I remember years ago when we had no money we went without and that included electricity, the problem is people feel they have a right to own all these things and put themselves in debt to get them.

[rd409]

And what if the person does not pay back in 10 days, the fees are still fixed?

That is what I said exactly. It is a good solution for only the ones who know how to use it. Unfortunately, those who do rarely needs this kind of services. This is similar to credit cards with cashback facility. If you only spend what you need, and consider cashback as a reward, then everything is okay, but then if you start spending more and more just to get more cashback, then you are in deep trouble.

As I said in my earlier post, I do not condone this services, I just wanted to comment on what seems to be extremely high % APR, may not be reflective of the actual situation.

[Notascooby]

The people that could use this service without the risk - are exactly the people that don't need it.

Your standard current account comes with a free £500 OD, so why would you need to go and cash a cheque for £100?

So whilst there's possibly a way to justify these pay-day loans and I don't think we should legislate against them, I do think there needs to be better education of those that use them.

But as CM states, some people feel they have a right to latest and greatest piece of tulip despite having zero cash.

[MarillionFan]

Did you read the article? "the convenience and innovation offered by payday lenders are attracting a broader and more prosperous selection of consumers, "

These services would be fine if they never lent to someone who couldn't pay it back quickly. If you need a short term loan, it can be cheaper than any other source of credit. Ignore the interest rates - look at overall cost.

Given the high number of people who will default / do a runner / go bankrupt then the APR has to be high enough to cover those costs. Those who can't or wont pay back shouldnt borrow in the first place.

[EternalOptimist]

When I was in that predicament, i.e. no money at all, we didnt have payday loans, we had the 'provident woman' who came around , door to door offering cash and a pay back scheme.

I never got involved personally, but it caused a lot of misery. people genuinely thought they were getting something for nothing

[rd409]

Your standard current account comes with a free £500 OD, so why would you need to go and cash a cheque for £100?

Back in my student days, I used to use Cashback sites like Quidco to earn cashback on these sort of sites. They use to offer 25-50 quids of cashback for registering and using their service.

So register, and apply for a loan of 25 quid. Payback 40 at the end of the month, and they give you 25 quid in cashback. So a tenner for free. Then use your other bank accounts and email address and repeat it for similar services. That used to pay for my parties every month. But then i never used to spend the money I got from these services. Money in, goes straight into Money out account.

[MarillionFan]

When I was in that predicament, i.e. no money at all, we didnt have payday loans, we had the 'provident woman' who came around , door to door offering cash and a pay back scheme.

I never got involved personally, but it caused a lot of misery. people genuinely thought they were getting something for nothing

It's always been around 'on tic', 'the never never', 'HP'. It's nothing new.

[Arturo Bassick]

There seems to be an assumption that these types of loans are only used by wasters with no clue about finance which simply isn't true. Many of them will have budgeted properly and included the cost of the loan into their costings, they will have decided they can afford the loan and taken it on.
It is just that they can not get a "real" credit card due to some previous issue, and as was pointed out some people are choosing this type of loan as best value for money.