Most people have experienced that sinking feeling as pay day floats on a distant horizon and yet another bill lands on a doormat much closer to home. With whole countries experiencing difficulties in paying the gas and electricity bill, the public sector wage bill and the multi-trillion overdraft, you are certainly not alone; but it may well feel that way. One hugely popular solution to the discrepancy between the final demand date and pay day, is the short term loan. Government and charity organisations have given many of the firms offering this type of loan a rough time, but the basic rule of 'you shouldn't borrow at a million per cent interest' is easy for experts and advisors to say when they have heating, lighting and a hot meal to go home to. So should you or shouldn't you?
The short answer and its longer cousin
The short answer is that you shouldn't, of course. The alternative answer is that from time to time you may have to. Borrowing from "pay day" loan companies, who prefer to be known as "short term loan" companies, is risky business. However, it can depend on who you borrow from and how sensibly you manage your debt. The basic rules are that if you are certain your wages will arrive on time and you are certain you can pay back on time then it may be an option to borrow.
Counting the costs*
Of the many companies who offer this type of loan Wonga is one company that has received some positive press and recognition for its openness and honesty. Currently the APR (annual rate) on their short term loans is an imaginative 4214 %; the company are not shy about this and you don't have to spend years trawling their website to find it displayed. The reality of repayments depends on the term of the loan, and the best way to use the loans is by borrowing the smallest amount possible for the shortest duration. As examples, £30 today will cost you £9 if you borrow it for ten days (£39.00 to repay in total); £100 will cost £15.91 (£115.91 to repay) for the same period. Wonga also offer a clear explanation of what will happen if things go wrong; they will charge a late payment fee of £20.00, but unlike most banks they'll only charge this once, although interest will be applied to your account for up to sixty days. If things go wrong they will discuss the problem and try their best to come to a solution for you both. On the upside the company is one of the few that don't charge an early repayment fee, so you can clear your debt earlier than expected at no additional cost.
Alternatives and last resorts
The short term loan should be viewed as just that; something to get you through for absolute essentials in the very short term. As an alternative you should also contact your creditor, to see if they will be willing to delay a payment - this is especially important with utility companies as their regulators take extremely dim views of companies willing to cut off customers who are experiencing short term difficulties. If all else fails then a short term loan may be a short term solution; just make sure it remains short term and a last resort. Creditors are usually always open and helpful if you simply call them and let them know you are struggling to make ends meet. Many companies will try to help you resolve the problem by working within your financial constraints, so always opt for that option before resorting to a pay day loan.
The short answer and its longer cousin
The short answer is that you shouldn't, of course. The alternative answer is that from time to time you may have to. Borrowing from "pay day" loan companies, who prefer to be known as "short term loan" companies, is risky business. However, it can depend on who you borrow from and how sensibly you manage your debt. The basic rules are that if you are certain your wages will arrive on time and you are certain you can pay back on time then it may be an option to borrow.
Counting the costs*
Of the many companies who offer this type of loan Wonga is one company that has received some positive press and recognition for its openness and honesty. Currently the APR (annual rate) on their short term loans is an imaginative 4214 %; the company are not shy about this and you don't have to spend years trawling their website to find it displayed. The reality of repayments depends on the term of the loan, and the best way to use the loans is by borrowing the smallest amount possible for the shortest duration. As examples, £30 today will cost you £9 if you borrow it for ten days (£39.00 to repay in total); £100 will cost £15.91 (£115.91 to repay) for the same period. Wonga also offer a clear explanation of what will happen if things go wrong; they will charge a late payment fee of £20.00, but unlike most banks they'll only charge this once, although interest will be applied to your account for up to sixty days. If things go wrong they will discuss the problem and try their best to come to a solution for you both. On the upside the company is one of the few that don't charge an early repayment fee, so you can clear your debt earlier than expected at no additional cost.
Alternatives and last resorts
The short term loan should be viewed as just that; something to get you through for absolute essentials in the very short term. As an alternative you should also contact your creditor, to see if they will be willing to delay a payment - this is especially important with utility companies as their regulators take extremely dim views of companies willing to cut off customers who are experiencing short term difficulties. If all else fails then a short term loan may be a short term solution; just make sure it remains short term and a last resort. Creditors are usually always open and helpful if you simply call them and let them know you are struggling to make ends meet. Many companies will try to help you resolve the problem by working within your financial constraints, so always opt for that option before resorting to a pay day loan.
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