Payday Loans
Are there any alternatives?
If you are stuck for cash short term, alternative
sources of credit include the overdraft facility
on your current account,
if you have one, or a credit card.
Most credit cards offer an interest-free period,
typically 56 days, so you will not be charged interest
if you repay the balance in full by the date given on
your monthly statement. If you already have a credit
card in your purse or wallet, this could offer the perfect
solution to a short-term cash-flow problem.
And while interest rates on credit card are usually higher
than those on unsecured or secured loan rates, many have
lower charges than payday loans. The average
credit card rate is around 17% although there are numerous 0% introductory offers.
If you know you will have a cash-flow problem and can plan ahead,
one of these deals could be a great low-cost borrowing option.
Even if you don’t have time to apply for a new deal,
a credit card could prove to be a cheaper way
of borrowing than a payday loan, particularly if you
need to borrow over the medium to long term.
If you decide to follow the overdraft route,
check the interest rate first. Rates vary significantly
so if you regularly slip into the red it is worth
looking for a current account that offers a competitive
overdraft rate.
If you are stuck for cash short term, alternative
sources of credit include the overdraft facility
on your current account or a credit card
Also, make sure you have an authorised borrowing facility set up
before you go overdrawn. Many current account providers charge a
higher rate of interest and levy penalty charges if you go overdrawn
without permission.
Another alternative source of short-term credit is your
local Credit Union. These small-scale financial organisations,
of which there are hundreds throughout the UK, typically
offer loans with interest rates below 15%.
