Friday, 12 December 2014

NEVER ever take a Cash Advance or a Pay Day Loan

Getting into debt around Christmas is incredibly easy.  It is easy to fall into the spending trap and to feel obligated to spend large amounts of money.  The constant bombardment of advertising at this time of year was what prompted me to write my article providing 5 tips on saving money this Christmas.

However this year I noticed another worrying trend when it came to advertising: the number of payday loan companies that started to advertise on the radio, internet and on television.  "Strapped for cash...stop the worrying and say yes" type advertising  that most of us should ignore.

If you thought credit cards were bad...wait until you see cash advance loans

I have talked about how the best way to get ahead is to avoid credit card debt (where the interest becomes payable).  The interest rates on credit cards run at 19 - 22% p.a. which is least I thought so until I saw the types of rates being charged on cash advances.

The first site I clicked on charged 24% for a 30 day loan...24%...that's not a per annum rate.  That is the rate over the 30 days.  That is a 966% interest rate per year (compounded).

I was going to do a full summary of payday lending but this video encapsulates everything I wanted to say:

The more I research this issue the more saddened, outraged and worried I am for the financial health of some of the most vulnerable people in society.  However for an explanation which is far more complete than mine could ever be check out this brilliant video by John Oliver

But what if you need the cash right now?  Should I take a pay day loan?

No!  There is almost no situation I can think of where you should take a pay day loan.

When you're desperate, you're desperate right?  What if you need the cash right now?  I appreciate the dilemma you find yourself in and can't imagine how challenging it must be, however literally any solution is better than a pay day / cash advance loan.  

Consider consolidating loans, going onto payment plans, restricting all your spending or selling assets.  All of these get you ahead financially (albeit very slowly). A pay day loan sets you back further than almost anything else.  As much as I hate to say it...even credit card debt is better than this type of debt (although you should question why you are going further into debt).

And to bring this back to Christmas...

To bring this back to the Christmas theme I originally started with...this Christmas promise yourself that you will not spend beyond your means.  Giving a gift is not worth it if you are going to get yourself into debt.  Don't charge that credit card and please  ignore all the advertising and never ever get a pay day loan.

One disclaimer I need to put in here is that I do not know your financial situation.  If you're in serious financial trouble please speak to someone about your issue who can help you and determine what is best for you.  The examples I have given above are generalisations only and are not intended to be financial advice.

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  1. Agree with you on this one 90M, it is often the most needy of our society who end up falling prey to these types of loans and arrangements..

    Got your email too and I'll reply tomorrow :)

    1. You're completely right - these types of loans are definitely predatory!