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10 Points about payday loans you should know

1.           All payday loans operate on high interest rates, or APR (annual percentage rate). This means that if you borrow 200 pounds at 5000% APR, you will have to pay back 5000 % of 200 over the period of one year.  This is an average APR but nobody should take a payday loan out for a year! Payday loans are not designed to be used as long term loans. Rather look at it as a 1% a day interest rate which will give you a better idea. This will still motivate you to use this facility as it is meant to be used: for a quick incoming loan to be paid back almost as quickly.

2.         Payday lenders normally want access to your bank account. This is called a CPA – “continuous payment authority” and it allows the payday lender to access money from your debit card without asking you every time. The lender does have to ask you the first time. You must sign something to allow it in the first place. The problem is that a CPA is easy to set up and a bit complicated to cancel.

3.         Since 2009 your bank must stop any payments to any lender, regardless, if you instruct them to stop. Any payments that continue after your instructions to stop must be refunded to you.

4.         Consider borrowing money from your family rather than a payday lender: You could consider asking some of your contacts to help you out if you know that you need a long-term loan. Rather try another solution before you approach a payday lender for a loan other than short term loan.

5.         Following on from point 4, you might want to approach a bank, a building society or a credit union if you need a loan other than a short term loan. This is because if you need to borrow money over time these institutions offer an APR (remember that) of 7 – 11% which is a far cry from the 5000 which some payday lenders charge.

6.         Payday loans are for quick cash that you quickly repay. You do not want to roll the loan over because this is where you get into trouble. Keep rolling it over and things are going to get bad. That heavy interest is going to weigh down. But, well, you should have understood when you took the cash that you…

7.         Looked before you leaped into the loan. You should have read all the conditions and read the fine print.

8.         Here is one of the most important points. Can you pay the loan back? There are associations and government checks as well as all kinds of people who are supposed to be making sure that nothing unpleasant happens to you when you borrow money but at the end of the day it’s up to you. Your name is on the paper, you are borrowing the money, you signed for the loan and you should make sure you can pay it back on time.

9.         There are complaints that payday companies will pester you if you are defaulting in repayment. Well your bank, your store cards and your credit card providers are probably doing the same thing if you fail to repay the money you owe them. If you want the payday lender to stop pestering you then manage your debt!

10.       Payday loans are quick but come at a high price. Why is the price of a short term loan so high? It is because payday lenders take a risk every time they lend money. Payday loans are unsecured which means the lender is vulnerable.

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