How Banks Slid Into the Payday Lending Business

Whether you kept on finding yourself short of money every month, it was always better to talk to your High Street bank. No longer. The credit crisis has restricted the access of ordinary people to traditional lenders. Overdraft extensions, personal loans, credit cards; Many are outside the limits of the masses. The rising cost of living, the reluctance of banks to lend money and the continued demand for credit, has led to a new class of lenders: payday lending business.

The Story of the Tape: What Is a Payday Loan?

It is simply a small advance of short-term cash on your salary designed to cover your expenses until the day of payment. These loans generally involve a loan of £ 50 – £ 750 – and get the cash in your pocket in a matter of hours. A lender will advance money against your bank details and automatically recover it once your next payday arrives.

In the Blue Corner: 24 Hours of Loan Payment

The great strength of payday loans is that they give those people to whom the banks have turned their backs the opportunity to get credit once again. Also, they are one of the fastest ways to borrow money. That is why UK payday loan applications have increased by 55% this year alone. And why almost 10 million borrowers in the USA they have benefited from easy payday loans for decades.

UK payday loan companies generously admit that there are less expensive ways to borrow money. Even cheap loans have high annual percentage rates. On the other hand, we are talking about a short-term loan here, so an annual percentage rate does not provide the clearest indications of how much the money actually costs on the day of payment. A much simpler way to calculate the charge is to borrow £ 100 from a UK payday loan company and pay around £ 125. And this compares positively with many credit cards, and it’s definitely cheaper to exceed an overdraft limit.

Payday Loans Do Not Require Credit Verification

Certainly, this has its advantages and its pitfalls. That is why the lenders make clear the true cost of the loans in the application stage. Only as that they clearly assess a borrower’s ability to pay. That’s why the British Casinos Association receives almost no complaints from the public about payday loans.

The more often you take a payday loan, the less expensive they become. The numbers of lenders offer up to 15% discount for recurring borrowers. Most companies will also not charge an administration fee. The best place to find free payday loan offers compared to those offered by high street banks is online. Check here.

In the Red Corner: Bank Loans

Bank loans have been around for a long time. Usually, they involve lending much larger amounts of so-called reputable lenders to a lower APR. Well, they used to do it! Unluckily, our old friend’s reputation, the bank loan, is a bit shattered in recent times. If we have to believe the commentators, it is the irresponsible loans of the banks that turn our economy into a recession.

The Verdict

When it comes to borrowing large amounts with a low APR, payday loans can’t exceed a bank loan. But banks have been well and truly demolished from their position as the most reputable lenders in the United Kingdom. Here is the problem; the struggle between the two is a total mismatch. Banks are not lending to a large proportion of their clients. So, this referee is finishing the contest right now.