In his first Finance on Friday column for Altrincham Today, Joel Adams from LIFT-Financial takes a look at the perils of payday loans.
We all face financial pressures from time to time and occasionally some people have had to rely on credit cards and overdrafts to solve short term cash flow problems in the past.
However, the advent of so called “payday” loans means that credit is now much more accessible than ever. Money appears to be easy to get – the adverts all re-assure us that it is literally just a click or a phone call away.
When faced with short-term needs, few people will stop and consider the long-term implications of the decisions they are making. In the case of payday loans they can be disastrous – interest rates that can quickly spiral the debt into many times the amount you borrowed, as well as the legacy it will leave on your credit rating. Other more traditional lenders for loans such as mortgages for instance will assume that you can’t control your own financial affairs if they see that you have been using payday loans and will therefore not be willing to lend to you.
[pullquote align=”right” cite=”Joel Adams”]How can it be that Altrincham has so many people who need to use these toxic types of debt?[/pullquote]By using payday loans you are therefore leaving a footprint on your credit history that will be hard to shake off.
Given all of this, I was hugely concerned to see recently that Altrincham topped the Google list of towns in the UK for the most internet searches for payday loans.
Altrincham is clearly a relatively affluent and largely middle-class town, so how can it be that we have so many people who need to use these toxic types of debt? We live in a consumer-led society, and a short term “buy it now” kind of attitude could be driving some people in the town towards payday loans. But could there be other reasons?
Using payday loans points to a lack of financial savvy. Could it be that we have a knowledge gap in the ways to run our personal finances? Saving for things you need (or want) to buy will give a much better outcome than borrowing the money at huge financial and reputational cost.
If you are using payday loans think about how you could avoid doing so in the future – putting a little aside each month in a savings account might stop you having to do it in the future.
Those that are struggling with debt need to seek help and there is no better starting point than the Town’s Citizen’s Advice Bureau who can be contacted via www.traffordcab.org.uk.