Trust in Banks at All Time Low

Payday loans are increasing in popularity among certain types of borrowers. Some lenders are reporting a rise in payday loan applications as high as 25%. A report by Consumer Focus estimates the number of people taking payday loans has increased sinc

Los Angeles, CA (prHWY.com) May 10, 2011 - Trust in Banks at All Time Low

Payday loans are increasing in popularity among certain types of borrowers. Some lenders are reporting a rise in payday loan applications as high as 25%. A report by Consumer Focus estimates the number of people taking payday loans has increased since 2006 to 1.2 million people, borrowing a total of £1.2 billion. The reason behind this rise in payday loans has much to do with the global economic recession and the fall in consumer trust in banks.

Consumers continue to experience rising living costs and stagnant wages leading to lower disposable incomes. This leaves many people short at the end of the month. In the case of an emergency bill sometimes a payday loan is the best solution.

Payday loans are now mainstream financial products used by tens of thousands every month looking for affordable short term credit. Customers are using them as alternatives to bank overdrafts and credit cards.

A report by the Daily Mail in February 2011 revealed the cost of an unauthorised overdraft with the leading banks was more expensive than a payday loan. Fines for late payments and interest accumulated for being overdrawn at your bank could mean a 3,000% APR, this compares to a representative APR 1737% (variable) for a payday loan.

Louise Goldstein marketing manager for Payday Effect says "The trust in banks continues to fall as people are fed up with unfair overdraft charges, high unsecured loan rates and all-time high credit card rates."

The report carried out by Consumer Focus estimated consumers who use payday loans are taking an average 3.5 loans per year, with the average amount borrowed at £294.The research shows the majority of people taking payday loans have a household income of less than £25,000 and are more likely to be young with over half under the age of 35.

Payday loans should not be used as a solution to debt problems and can help out in specific cases. The loan should be paid on the next payday. The dangers occur when consumers take out a loan and are unable to repay. If the payment is deferred then the interest can quickly mount up leaving consumers in a debt trap.

The market for instant payday loans in the UK is still fairly young and could rise further in the future by as much as 45%. Research shows people are beginning to favour payday loans because they are quick and easy to apply for. Application forms are short and money is released quickly often on the same day. It is very clear how much the loan costs and when you have to make repayment.

When finding a payday loan ensure you use a licensed payday loan company. You should look around as rates can vary. You can carry out a search on the Internet to find a lender which you can trust and whose terms of business suit your requirements. With so many companies offering payday loans, the payday lending industry is a competitive market. Some companies differentiate themselves by giving fast turnaround decisions and releasing funds within hours.

For more information about payday loans, please visit http://www.paydayeffect.com

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Categories: Finance

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