Payday loans in the UK are increasingly taking centre stage in the financial market due to the aid they give to local citizens. However, there are some critics who have come out strongly to object these services stating that they are horrendous and all they do is exploit the citizens.
Firstly, they note that payday loans drain money from low-income communities. Taking out a bank loan may be difficult for a low-income earner due to lack of a substantial asset that a bank can hold on to incase of default in payment. Payday loans do not require these forms of securities. They therefore take advantage of this fact and charge high interest rates to this class of people as they have no other option to fall on to.
Secondly, lenders of payday loans tend to exploit financial hardships for profit. With this in mind, payday loans are normally taken out by people who face sudden financial constraints before their salary is due. Payment of the loan is then made when they receive their paychecks. These lenders therefore lend money to this class of people and exploit them by charging high interest rates so that people depart with a huge sum of money when their salaries arrive.
Payday lenders ignoring restrictions
Thirdly, payday lenders ignore legal restrictions. Payday loans in the UK are normally regulated by statutory provisions. However, these lenders have been known to ignore usury limits (usury is unreasonable and excessive rates of interest) set out by legislation and charge higher amounts than they are entitled to by law.
Lastly, they tend to use very aggressive advertising practices. Professionals are often deterred from excessive advertising. However, this class of professionals has gone to the extent of even advertising payday loans UK on social networks which are an abuse to the profession and it signifies malpractice and unscrupulous activity.
The Real Cost Of Payday Loans In The UK
Taking out a payday loans in the UK may appear to be very beneficial to any person who has financial needs that need to be met yet there is lack of capital. However, one should take a look at the bigger picture. A payday loan is too sweet a deal and it needs someone to think hard before taking one out. These forms of loans do not require security therefore citizens will tend to find them more appealing and if not approached with caution, they may be the sole reason why one will remain in debt throughout their lifetime.
Though these loans appear attractive during emergencies, one should remember that whilst paying back, the sum will be more considering the addition of interest rates to the principal figure. Therefore, one will have to depart with more money when his or her paycheck arrives. Lenders also set very high interest rates thereby manipulating the pockets of the borrowers. Currently, there is no legislation that regulates interest rates that are charged by payday lenders therefore they tend to fix them at exorbitant prices. There is legislation that covers payday loans however it does not regulate these rates leaving lenders the discretion of choosing their rates. They choose high rates which will in turn give back to them high profits.
Therefore, at the end of the day, one should opt for the savings mechanism instead of the payday loan system in the UK. When salary is received, one should use it in a manner that leaves room for emergencies. Moreover, there are other mechanisms that one can employ to envisage risks. For example, one can take out a policy from an insurance company that will cover uncertainties such as medical expenses, life, accidents and so forth.