Why Websites Offering Payday Loans should be Treated with Extreme Caution

In the last five or six years there has been a sudden growth of payday websites. This is a sign of the times along with the growth of ‘pawn brokers’. Why are payday websites in so much demand?

Payday websites have been on the increase since the credit crunch and failing world economies. There is now higher unemployment in most Western countries and more people on the bread line. Many people who still lucky enough to have jobs, can find it hard to make their money last to the end of the month. Businesses have seen an opportunity to fill the growing need for short loans by providing payday loans.

Most people do not need payday loans even when they are hard up. Only a small percentage of the population resort to payday loans, why? The main reason is payday loans charge very high interest rates. These rates are way above those charged by credit cards. Most people who resort to payday loans have no other means of getting a loan. This could be because of a bad credit rating. Those people with poor credit and desperate to get a loan to tide them over to the end of the month, may be forced to go to a payday loan company.

Payday companies make few credit checks and work on the assumption that once a client is borrowing from them they will never be able to balance the books and will need to return over and over again for future loans. The interest rates are so high that those people trapped into taking payday loans will soon find themselves in even deeper financial trouble.

Those people who default on payday loans may find their troubles are just beginning as the payday companies are over zealous in collecting unpaid loans and do not follow laid down financial guidelines.

It is difficult to say where one should turn if in dire financial need. Without a doubt one should avoid payday companies even for the shortest period loan. If one has a credit card or a bank over draft, this should be used first as the interest will be infinitely lower than a payday loan.

In the United Kingdom the government is concerned about the growth of payday loan companies and their practices. The government has warned that they are considering regulating payday companies unless they change their policies, especially in regard to unpaid loans.