The recession in the UK has hurt personal finances. As a result, High Street Banks (The big four - Natwest, Barclays, Lloyds and HSBC) now have tighter restrictions on who they will approve for loans. Those being rejected, normally due to an adverse credit score have little choice but to turn to lenders that do not carry out credit checks.
Payday Lenders such as Quickquid and Wonga are taking advantage of this and are promoting payday loans heavily on daytime TV in the UK on satellite channels like MTV and the Shopping Channel. The psychology would suggest that those watching daytime TV are either unemployed or on benefits and are the perfect target market for Payday Lenders.
The whole idea behind payday loans is that people go to a payday lender and get a certain amount of money without ever having to go through a credit check. This is beneficial because when unexpected expenses come up, money can be accessed quickly. Credit check agencies slow up the loan approval process. Experian and Equifax are the main ratings agencies in the UK.
Unfortunately there are drawbacks to Payday loans as a finance option. UK Citizens still have to prove that they are in full time employment and show proof of what they earn, which usually means having to hand over a P45 wage slip. The lender will then use the wage slip in order to determine how much money will be offered to the customer, if any at all. This means that each person is limited to how much money he or she can get as a direct result of how much they earn.
Another big drawback to payday loans is that there are no laws in the UK that restrict the interest rates that can be applied to them. That means that the lender can state the terms without having to deal with any regulations. To add to that, advertised interest rates are just that, advertised, and are what people typically can get but not necessarily what they will get.
That being said, before accepting a payday loan from any big lender whether it's QuickQuid, Speedy Quid, Wonga.com or any other lender it is important to know the terms and have them in writing. If a person cannot get a good rate then there are other types of loan out there that don't require credit checks and those options should also be explored.
Paul Jayson Jones is a financial blogger and writer, contributing to several personal finance blogs. Jenga Loans has several payday loans articles that Paul helped write.
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