Are online payday loans posing a problem?

What are online Payday Loans? Payday Loans are short-term cash loans, offered over the internet, advertised on the TV, and in most media outlets and sometimes offered on the high street. The most popular way to obtain a payday loan is by going in to the internet and applying for an online payday loan.

What service does a payday loan provide? Well they help someone out with a bit cash until their next paycheck comes through. Usually the person who is borrowing the money has some emergency, a bill that has to be paid, is a month late on rent, has just over-extended themselves. How it works? Usually the person who is borrowing the money puts down a post-dated check as collateral to the money lender, which of course includes interest.

How many of us use a payday loan? Well it’s hard to tell. Estimates fell in the range on 1.2 million people taking out loans in 2008. The latest reports approximate that by the end of 2012 almost 1.8 billion pounds have moved through the hands of borrowers and lenders in the Payday Loan business.

Again we rely on the statistics of 2012, where the Office of Fair Trading (OFT) announced that there were approximately 240 Payday loan firms in England with the largest share hold in the market being held by 50 firms. Some of these firms operate as large national chains that you will see in any high street. There are thousands of High Street money lenders. Actually, you need not even bother going down to the high street, you can just open your laptop at home and contact one of the100 reliable Payday Loan companies thought to be online.

The good news is just like banks, building societies and any other kind of financial institution payday loans companies are regulated. Payday loan companies can only operate if they have a consumer credit license from the Office of Fair Trading (OFT).

These loans are actually a good thing for many professional people who have the money to pay back the debt promptly the next day or a week later. It is an option that is actually cheaper than exceeding your overdraft, or overcharging your credit card. But as said, it must be paid promptly because as you will see shortly, this is not a long term solution by any means.

Here’s the problem. If you don’t pay the loans back in good time the debt will increase dramatically. If you let the payday loan roll over your interest will increase dramatically.

Payday loans are useful and sometimes essential but they must be used correctly and any payday loan must be paid back on time to avoid excessive interest accumulating.

In summary, used correctly and for the right reasons, payday loans are filling a necessary gap in the loans market and they are extremely helpful to get one out of a tight spot. Just use them correctly and ensure that if you do apply for a payday loan you approach a UK payday loans company that is registered and transparent.