From Wonga to Quick Quid – Choose the right PayDay Loan for you – Financial Advice

Paydays loans and their growing presence as part of the UK’s personal finance picture has become a source of controversy for many in the industry and charity groups concerned with helping people with debt problems. There have been accusations of poor practice and suggestions that such loans are the wrong option for people on low incomes.

Companies offering payday loans insist that they are providing a service that is in growing demand among personal finance consumers around the country and that the loans can be the best way for many people to deal with short-term financial constraints.

The latest figures show that the scale of payday loans that were taken on in the UK grew from £1.2 billion in 2009 to £1.7 billion in 2010, and the industry looks set to continue its rapid expansion as personal finances are increasingly pushed close to breaking point. The consumer champion Which? recently expressed concerns that there is widespread poor practice within the payday loan industry and said that regulators need to be vigilant to protect the interests and rights of borrowers.

According to Which? British consumers should regard payday loans only as “an absolute last resort” if they find themselves stuck for cash. “A temporary overdraft extension can be a much cheaper, safer way to borrow so if you’re struggling to get to pay day then the first thing you should do is talk to your bank,” said the lobby group’s executive director Richard Lloyd.

Typical APR rates on payday loans are well above those of most other forms of borrowing but the controversy around their increasingly common use was sparked again recently when a company called InstantLoansDirect.com said it would offer short-term ‘free’ loans to customers using its website in the run up to Christmas.

Consumers were of course encouraged not to use such loans as a long or even medium-term solution to their financial problems but numerous charity groups have expressed concerns that payday loans can have the effect of dragging borrowers in to a spiral of intractable debt, personal finance and money problems.

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