Are Payday Loans As Bad as They Have Been Made Out to Be?

If you are like most throughout the United Kingdom, you have most likely heard an appreciable amount of bad press concerning what are known as “payday” loans.  These financial vehicles vehicle are often touted as lacking transparency while the companies that promote them have been called unscrupulous.  Is there any validity to these claims, or are they completely unfounded?  The answer will depend on a number of variables and to appreciate the benefits and drawbacks of a payday loan, it is first necessary to take a look at some of the factors to consider.

 

The Company

One of the most obvious determinants is the company that supplies the loan.  While some organisations such as SGE Loans are well-reputed and will provide trusted services, smaller enterprises may not be as forthcoming.  This can obviously have dire consequences, for the borrower needs to be made aware of what this short-term loan entails and what he or she will be responsible for.  The company needs to offer clear-cut solutions, excellent customer service and should be highly rated from a host of independent reviews.

 

The Borrower

The second factor that cannot be denied is the fact that the borrowers themselves need to take a responsible approach when considering a payday loan.  Much of this will revolve around performing an adequate amount of research in regards to the company chosen.  Also, the borrower needs to carefully weigh the risks of these instruments against the rewards that they can provide.  In other words, are the higher interest rates worth the money itself that will be provided?  The last thing a borrower wishes to do is to become further in debt as a result of bad choices.

 

The Amount

There have been instances when the borrower takes out more money than he or she actually requires.  Whether this is due to a lack of foresight or the fallacy that these loans represent “easy money”, this is a dangerous situation.  There is no room for greed when applying for a payday loan.  Simply because the fund can be secured within a matter of hours does not define these loans as being free from risk.  If more liquidity is asked for than is entirely necessary, the chances of a default are much higher.  Therefore, applying for a payday loan needs to be approached in a highly conservative manner to avoid this potential pitfall.

 

The Terms

As mentioned earlier, transparent companies such as SGE Loans will make their terms and conditions absolutely clear to the lender.  In fact, government regulations require this to take place.  Still, not all enterprises will offer such levels of trust.  So, it is critical that the borrower read through these stipulations carefully before finally agreeing to any sort of contractual obligation.  If the responsibilities of both parties are made absolutely clear, there is much less chance that a loan will fail to be repaid in a timely fashion.

Adhering to these basic rules will allow you to make the most informed choice possible when applying for these handy financial instruments.

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Updated: January 24, 2014 — 6:05 pm

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