Furthermore, as with most unsecured loans, interest rates are relatively high often reaching 3 to 4 digits. In regards to repayment, this is usually arranged in the agreement with the lender, but usually, you repay the loan on your next payday.
Short term unsecured loans to be repaid by next payday is now a multimillion-pound business, some reports suggesting it’s worth over £900million. According to Consumer Focus, the payday loan market has almost quadrupled since the recession began. UK Lenders have noticed an opportunity to charge as much as 4,400% annual interest. Although, many payday lenders complain that APR is an unfair measure as the loans granted are specially designed to be paid off within 28 days and can be cheaper than most unauthorized overdrafts. Despite the huge interest rates, it’s been recorded that over 1.2million people have taken out short term loans over the last 4 years emphasizing that a growing priority within a typical UK household is a ‘quick fix’ to their finances rather than long term solutions. Despite the boom in the payday loan market, the Better Banking Campaign controversially claims that approximately 5 to 7 million people in Britain alone are still denied credit today.
Five of the seven largest payday lenders in the UK are US-owned or financed. This is because the idea of the Payday loan originated in the US. Ironically, many American States have now effectively banned these forms of short term loans by placing caps on interest rates that lenders charge. MP Stella Creasy has recently proposed a Bill to enforce similar regulations in the UK in regards to short term lending.
The ‘Ten Minute Rule Bill’ comes after a front-page scandal that reported over 5,000 innocent Britons were told they owed hundreds of pounds in loan repayments, despite never obtaining a loan in the first place. Creasy hopes she will receive government approval to tackle the increasing level of loan harassment to families living in poorer communities.
For more info on payday loan or help on payday loan debt relief you can visit online expert.