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Payday Loans Could Help
A recent report by the banking group within Abbey sheds some light on how many people struggle to manage their finances and often have to borrow money just before they receive their next pay cheque.
People turn to all kinds of help at this stage of the month including taking out payday loans, credit card borrowing, overdrafts, raiding savings accounts or asking family and friends for help.
The research found that 64% of people have problems towards the end of their financial month due to poor budgeting.
With the festive season approaching potentially millions people could be looking at shortfalls in cash and needing to find funds elsewhere to see them through to their next payday.
In the US payday loans are very popular as they provide small amounts of money at short notice. The loans need to be repaid quickly and often look cheap on paper, but in effect they are usually very expensive. When their typical interest rates are quoted they look unusually high, but because the amounts and terms of the loans are small, the charges look affordable. The real problem arises when the loans are not repaid on time or people find themsleves taking one out on a regular basis.
Credit cards are the most efficient means of short term borrowing (less than 2 months) if people are able to pay off their full balance on time and resist the temptation to withdraw cash from their credit cards. Arranging, what is effectively a loan, by using the cash withdrawal facility of a credit card can be very expensive.
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