The Rise and Rise of the Payday Loan

The global recession has given the payday loan industry a huge boost, as a result of the cost of living increasing and the value of money decreasing many have been turning to this non-traditional method of acquiring a loan.

The majority of these payday loan firms offer the customer a fast short term loan that has to be paid back within one month or as and when the customer gets paid. Most of these companies are offering loans to those they know cannot afford to pay it back, with the highest interest rates in the lending industry. Some payday loan companies charge as much as 1000 per cent interest.

The number of Britons taking out payday loans has risen by 100 per cent in the past 24 months making it the sharpest rise of this kind in a decade.

The payday loan has been prevalent in the United States for a while but Britain has only recently jumped on the bandwagon, with over 100 new payday loans companies in the past 11 months this industry does not seem to be slowing down. With the announcement of the new budget it looks like the payday loan industry is going to continue to boom for a long while yet.

In a survey conducted last month over 1000 consumers were asked if they had ever taken out a payday loan 60 per cent said yes they had, 20 per cent said no and they never would and the remaining 20 per cent said they had not taken out a payday loan but they would in the future. Due to the fact that their money is no longer stretching as far as it used to.

Many independent critics have stated that payday loan companies are no different from loan sharks, as they prey on the vulnerable. People who actually cannot afford to pay the extortionate interest rates, some say they have taken advantage of the fact that people are struggling financially and they are making millions out of it.

An unnamed company in based in the UK offers $200 payday loans to American consumers, their employees are actively encouraged to suggest that customers extend their loan period. Meaning that they have to pay extra on top of the original loan and the accrued interest. These companies thrive on their customers paying their loan back late, therefore allowing them to pocket extra in late payment fees.

The financial Ombudsman have encouraged consumers to take caution when applying for payday loans, and have given the advise that they must always read the small print. As majority of the time the fine print will have a plethora of clauses that do not consider the consumer and protect the payday loan company. Payday loans look like they are here to stay, as long there are customers who are in financial need, there will always be a need for a payday loans.