The payday loan trap:Throwing good money after bad

This year, five times more people have contacted us to help with several payday loans that we saw three years ago.
Although there is much debate about whether payday loans are a good idea or not, some could argue that they should never be a short term solution and taking multiple payday loans is generally a sign of an underlying problem that needs debt help.

An ostrich state of mind

It can be surprising how often we make decisions that will help us in the short term, but will we leave a big problem to deal with the line, but it is the mindset that led to multiple payday loans.

We bury our heads in the sand from time to time, when the reality of your situation is too scary to face head on it is easy to put it off for a month. It’s a bit like the feeling you get when you know that the household must be done, but decide to put it off until tomorrow. Opting for a loan means extra pay a month before you have to deal with your debt problem.

The problem is that next month comes around too fast and rather than solve the problem, taking multiple payday loans only compounds the problem when you try to finally get your finances sorted. It became such a problem that we have seen a massive increase in the number of people who come to stand over ten payday loans at the same time.

What’s a payday loan?

A borrow money is a short term cush loan. They tend to last about a month and usually will be timed so that you repay the entire debt from your salary. Interest rates are generally much higher than the average personal loan because they are out for short periods of time and also because credit checks are often less strict.

Payments on payday loans are taken from a debit card, which is more difficult to cancel a direct debit (if you’re in this situation, we practice a blogpost on how to stop payments on a payday loan).

Payday loans – how it happens

With so many people struggling and more conventional forms of credit harder to come can be very easy to take out a payday loan. The extra few hundred pounds they offer can not provide a long-term solution, but it can keep things ticking along.

If you are offered the chance to have a little extra money with minimal credit checks then it may be tempting, even if you have no idea how the business to repay the debt.

The payday loan cycle

Once you’ve taken your first payday loan will generally settle things for the next month. The little extra money calmed the financial storm and you can return to normality.

The problem may be in the next month. If you do not have the money to pay off the first payday loan, it may be tempting to take the offer to ride for another month, giving you a little time to fix things, but have to pay a month interest.

Only delay the payday loan is not enough because you are far from the money you need to cover everything. You think about how things sorted ready for the previous month, then you take another to help you this month. You know it would not be a good idea, but at least you will not have to deal with it until the next month.

Once you’ve done it once, it can be very tempting to keep the cycle, taking a new payday loan each month and recycle the ones you have already released. Common sense would tell you that it is a bad idea, but it is hard to think with your rational mind when you.

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