Some sensible news from UK politicians: enforce greater control on companies offering payday loans
Payday loans have been widely criticised in the UK for targeting certain groups of people, particularly individuals who have a poor credit history due to large debts. These are exactly the kind of people that, when given the opportunity to receive these loans, fail to pay them back in time because they don’t take responsibility for their personal finances. The UK Government is demanding new policies to prevent these high street firms from taking advantage of vulnerable individuals.
Truly astonishing interest rates
The real danger of payday loans is the interest rates that accompany them. Paid back on schedule, they will typically incur a 20 percent interest rate, however should you forget to pay or if you are simply unable to afford it, these interest rates can increase dramatically. A payday loan of £500 that is scheduled to be paid in 21 days but is still unpaid after one year would command a four figure interest rate, which could be as much as £10,000. Many people use these loans to pay for non-essential things, like new clothes, holidays or fuel from a red diesel supplier.
Misleading adverts
Many popular TV channels are paid good money to advertise payday loans, which promote them as harmless ’short-term' solutions to financial woes and completely contradicts common-sense advice for people struggling with their finances. Many Britons don’t even know what AER means (Annual Equivalent Rate) and a large portion of the population doesn’t even know the definition of the term ’interest rate’, even people who are considering taking out loans.
The Government’s Commons Select Committee pointed towards a recent campaign by The Independent, which blasted short-term lenders for targeting people like Jobseeker’s Allowance claimants, who are ineligible for loans from banks or other lenders. It is hoped that news legislation will enforce much tougher regulations, which will make it much harder for people with very poor credit profiles to access short-term loans.
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