Home Business Insights & Advice Nine out of ten payday loan users unhappy about finances

Nine out of ten payday loan users unhappy about finances

by Sponsored Content
6th Dec 19 10:22 am

The welfare of online loan users is in the spotlight as payday stats say 87% using the product are unhappy in their current financial circumstances.

Using loan lenders through the Internet isn’t everyone’s idea of a good-time. But new research from the cash loans website SimplePayday could just confirm the fact. The stats, which pit the users of the loans as unhappy and not able to manage their present finances, serve to highlight an industry rife with customers either late repaying loans or, in the case of many, ongoing money problems.

61% of users cannot manage their own money

This peek into the mind of a payday loan borrower is both scary and confusing. With 61% of users of payday loans answering that they had ‘no confidence’ in managing their money. Another of the stats which was alarming, was that 87.2% were not happy about their present financial situations.

If this is really the case do we not have an issue with people that clearly should not be lent money being lent money?

Is the explosion in websites the problem

The proliferation of lenders, websites and shop-fronts could be assessed as the cause of the problem. However, as simple market economics points out, there is no supply without a demand. So what are the questions we should be asking? Why are people being driven to use these forms of credit when we have perfectly good banks for that, is a good one to start with.

Bad credit and an emergency

Most of the payday loan websites will point out that they are perfect for ‘emergency scenarios’ that need ‘quick cash,’ what they don’t point out is why a person would take the credit when the terms are so bad.

People that have bad credit are blacklisted from the financial products swimming pool. If you have bad credit in the UK you will struggle to even find a high street bank that will open a current account for you. There are exceptions. But a business bank account, with a bad credit rating? Zero possibilities are available to you on the UK high street. And this alone should inform you why consumers are using these products. Not out of choice or any type of practicality, but simply that they have no other options.

Live fast and pay later

The spend now and pay later attitude is one spawned from the credit card era and the hire purchase archives. UK residents are used to squiffy financial products being shoved upon them. Remember doorstep lenders? So bad. They used to come round to your house every week to collect, until retirement! People were often ‘not in’ when the ‘provident lady’ called round, as you wouldn’t if you owed someone £300 and you didn’t have it.

The speedy acclimatisation of the payday loan product via online websites, coupled with the lack of any other viable options – for a large proportion of borrowers, has got us to where we are today. Market demands at their finest.

Not going out of fashion (just yet)

The industry did 1.3billion gbp in 2018. Although this is a slowing of market demand compared to previous years, in 2013 the market was worth 2.3billion pounds per year.

The decrease in numbers is blamed on an industry tidy-up in 2015, resulting in some major ‘payday’ players, like Wonga and QuickQuid, being liquidated.

How much can I borrow and what is repayment?

In today’s payday loan market, most lenders will allow you to borrow anything from as little as £50, right up to £5000. Although, the larger sums are technically not a payday loan as repaid over a longer period than a month.

But for the 30-day financial product, typically, payday loans will be capped at £1000, this being the most you can borrow to repay in one lump sum. Anything over this isn’t really in market demand for the users of payday loans, for the simple fact of affordability.

Of course how much a specific person will be lent to depends on a myriad of factors, much like the Crystal Maze or Countdown, with not one component making the whole, but a plethora of algorithms, criteria s and checks all taking place under one bonnet.

The APR on payday loans is notoriously misleading. This is because instead of a year, the payday loan is repaid after a lonely month. Rendering the representation over a year, useless. The best way to represent the charges of a payday loan is a fee, now capped at no more than £24 per every £100 borrowed. If repaid as agreed. An introduction from the governing body the FCA in 2015, who also implemented a cap on interest rates if you are late repaying the loan. This now means the maximum you can be charged for late repayment is no more than £15, plus your initial loan and interest.

How quick do I get the loan?

If you are applying through a website you can have the loan in your account in under one-hour. Some websites claim to be even quicker, although what is clear looking through the websites is that you will have to check with your bank first. But if your bank has faster payments, which lets face it everyone does these days, the payment should be pretty quick, with no more than 2-3 hours being a safe window to leave.

Does applying for a payday loan affect my credit rating

All financial contracts where credit is involved will necessitate the files of a credit agency being checked. To think anything other than that is simply wrong. Your credit is checked for all types of financial products; from car insurance to when you get a new phone contract. Applying for a payday loan is no different as lenders need to check credit bureaus to confirm crucial parts of your application.

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