Payday Lenders Polarises The Population?
According to a recent survey by the comparison site USwitch, 49% of payday loan customers have had a positive experience, and 30% would consider taking one out again. However Switch’s study also suggests that 29% regret taking out a payday loan.
Also, whilst 19% said it helped to solve their financial problems, 18% said it made their financial worries worse.
Furthermore, 53% wanted the industry to be better regulated whilst 40% called for an outright ban.
These results show that perceptions of Payday Lenders are not clear cut with views that are expressed being quite extreme, or showing no clear majority.
In recent months the payday lending industry has been subject to a media backlash. On the back of this, more customers are complaining (often in a frivolous and vexatious fashion and approaching the Financial Ombudsman Service before addressing their alleged complaint in full to the relevant lender), the OFT is reviewing responses to its audit compliance requests and we are told that 14 of the 50 lenders visited by the OFT in this year have now left the payday lending market.
Payday lending is not a panacea and payday loans are not suitable for everyone. Certainly they are not a fix for structural financial difficulties, they are unsuitable and would be very expensive if used as a means of longer term borrowing, but they can be one option to help deal with unexpected short term small sum cash flow problems. There may be a value judgement to be made – an item on half price sale, perhaps, where the interest on the loan would be less than the 50% discount obtained, or maybe the cost of using public transport, not to mention increased travel time, if a sudden garage bill is required to be paid to retrieve a much needed vehicle and there are no immediate funds available to put the car back on the road.
Payday loans are not ideal for those who are inherently financially disorganised, or have little disposable income. The successful payday loan customer identifies a sudden need that cannot be met elsewhere, considers their options carefully and ensures they will have sufficient disposable income come payday to settle the loan in full, on the due date.
Repeated deferrals, extensions or rollovers, where only the interest accrued that month (and possibly a proportion of the outstanding capital) is paid at the end of each month, are not a sustainable method of using this type of finance. Lenders understand that customers circumstances can change very quickly and try to deal sympathetically and positively with those who find themselves unable to repay the loan in full and on time. However they also recognise that a limited number of deferrals, extensions or rollovers may be a lifestyle decision for a customer, as long as the customer is well informed about the consequences and additional costs of extending.
But for those who are able to use a payday loan as a temporary short term source of funds, this type of loan can work well.
Bio: Luke uses Uncle Buck when searching for quick payday loans, they do come in handy for paying unexpected bills! Luke has been researching the loan and credit industry for a few years now and is somewhat o an authority figure, if you have any questions please comment below and he will get back to you!
