Peachy. Sunny. Lolly.
Happy, friendly sounding words, right? Well that’s the idea. But these are also the names of three of the UK’s ever-growing list of companies offering payday loans, which don’t bring happiness to all who take them out…
One poll showed that one in three students have applied for a payday loan. Reasons range from helping with a rent shortfall or unpaid utility bills, to (more worryingly) paying for nights out. Getting through university with your finances intact is a challenge for many students, and with pressure on your pounds, it’s understandable you might look at all options.
And you can see why payday loans are tempting. The application process is quicker and simpler than a standard bank loan and if you pay them off really quickly, the interest might be manageable.
BUT, you’re likely to take out such a loan due to money troubles and if you can’t pay it off quickly, the cost can be very high.
Some examples I found on popular loan sites:
• Borrow £400. Pay back £204 a month for three months and the total repaid is £612 (approx. 50% interest)
• Borrow £200. Pay back after just one month and the total repaid is £246. (approx. 25% interest)
They might be an easy way to get your hands on money quickly, but they are also the most expensive form of credit by far. And if you can’t pay one off, you might even end up taking out another to clear that debt (and so and so on). I know this as I’ve seen it happen.
As a student, make sure you budget well to avoid running out of money and get a part time job if your course allows you the time. Student overdrafts are interest-free, so make sure you get one if you need one. On a scale of good money sources to bad ones, payday loans are right at the bottom, so avoid them if you can.
If you’re running very low and are struggling financially, you can always come and see the Money team in Student Support (Floor 3 of the Students’ Union) for advice (by appointment, 11:00 – 14:00, Monday to Friday)
For more information and advice on payday loans, see the Money Advice Service website.
Max Harvey, Student Support and Wellbeing – Money Team
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