The real dangers of payday loans
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A payday loan is a short term, high interest loan (often around 4,000% APR), sometimes called a cash advance, which lenders provide borrowers, to be repaid at their next payday. Some companies require some proof of employment or regular income, such as a bank statement, but increasingly more and more are not asking for such proof. Often no credit check is carried out, so the company has no idea whether you can realistically afford to pay this money back. And what is this 4,000% APR? APR stands for Annual Percentage Rate - the amount of interest you will pay back on your short-term loan on the course of a year. To put it simply, if you borrowed £1 for one year at 4,000% APR you would end up paying back £4,000. Borrow £1,000 and the figure becomes £400,000. The worrying thing is that online payday loan companies have made the process of applying for a loan quick, easy, and most importantly, attractive. You can apply for a loan in minutes, even from your smartphone. Some companies have even taken advantage of the fears students have over tuition fee hikes and have set up pages directed explicitly at undergraduates - causing them to quickly come under fire from the NUS.
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