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.
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