Kiran Trivedi’s Top Five Reasons You Shouldn’t Use a Payday Lender

With all the news on the subject lately, you should already know this, but in case you don’t, Kiran Trivedi takes the time this week to list my top five reasons why should never use a payday lender

What is a Payday Lender?

For those of you who’ve somehow managed to live in a media blackout for the past few months, a payday lenders is a service that seeks to offer you a loan that you then repay from your next wage. It’s essentially an easy way to lend money in the short term, without having to worry about the stringent checks and balances you would have to endure with most lenders.

On the face of it, payday lenders seem to be a fantastic idea. They’re quick, easy to use and efficient. You know what you’re getting and you don’t have to deal with high street banks, which have collectively lost the trust of many people in the last few years, because of the role that they played in facilitating the global financial crisis.

You Shouldn’t Use a Payday Lender for Five Reasons

However I would argue that this is an extremely short sighted and limited view, and here are my top five reason why:

1. A Circle of Money: The truth is that this isn’t free easy cash. People often seem to wilfully forget the fact that it’s a loan, and the money has to come from your next wage, leaving you with less money next month and perpetuating a horrible cycle.
2. Stress Test: There’s barely any grace period when it comes to these loans, because you’ve promised to pay it back out of your next wage. This means you’ll be stressing out a lot about how to slot the payment into your budget.
3. It’s Expensive: It’s so unbelievably expensive. Not only do they usually come with exorbitant interest rates, they also often come with extra charges, meaning that in the end, a payday loan is seriously bad value for money.
4. Continuous Payment Authority: The main reason most experts categorically advise you not to use a payday loan company is that you give them continuous payment authority. This makes the agreement difficult to cancel as you’re literally giving them the keys to your bank account, meaning that if you can’t pay them back, they’ll simply access your account to take whatever they can.
5. Subprime Lending: Did you also know it’s really bad for your credit rating, which will have ramifications when you need to make a larger financial commitment such as a mortgage? Financial institutions see it as subprime lending, which makes it look as though you are the type of person prone to needing money at the drop of a hat. Not very secure at all.