PayDay Loans Field Guide

Your guide to understanding Payday loans Payday Leans FIELD GUIDE WHAT ARE PAYDAY LOANS? They are loans designed to tide borrowers over until they get paid, with amounts ranging from £50 to £1,000. They could then be used for unexpected costs like: car repairs home repairs vet's bills LOOK OUT FOR Payday loans tend to come with high APRS (Annual Percentage Rates) - usually in the thousands. However, an APR shows the cost over a year, so it's not really the best way to see the cost of a short-term loan. A payday loan could start to become a problem if: You're using one to pay off another You've taken out You're using one to pay for essentials, like food & bills. multiple loans PAYDAY LOAN FACTS 2012 IN NOVEMBER IT'S ESTIMATED THAT PAYDAY LOAN CUSTOMERST HAVE QUADRUPLED IN THE PAST 2YEARS it was estimated that 5million E MORE THAN BRITISH ADULTS 200 PAYDAY LENDERS OPERATE IN THE UK WOULD CONSIDER TAKING OUT A PAYDAY LOAN IN THE FOLLOWING 1,200,000 6 MONTHS DEOPLE IN THE UK USE PAYDAY LOANS EVERY YEAR CHARGED A PAYDAY LOAN OF 8/10 £25 £500 PAYDAY INTEREST LENDERS F100 £150 IN SAMPLED BORROWED INTEREST FOR 31 DAYS FOR EVERY COULD COSTALMOST THAT'S NEARLY £5 DAILY INTEREST KEY QUESTIONS HOW DO I FIND OUT HOW MUCHI OWE? You should get a confirmation letter e-mail telling you: • How much you owe • • The interest you'll be charged • • When the loan should be paid back • WHAT IS A CPA? A'continuous payment authority' (CPA) allows companies to take regular payments from your account. If you have a CPA set up with a payday lender and you can't afford it, you can cancel it by contacting your bank or card issuer. If your bank makes any further payments, you'll be entitled to a refund. IS A PAYDAY LOAN MY ONLY OPTION? If you need to borrow some extra cash, it could make more financial sense to extend your overdraft, or use a credit card, depending on the interest rate. Remember: you could be charged penalty fees if you use an unauthorised over- draft. Talk to your bank to find out more. WILL INTEREST BE FROZEN IFI CAN'T MAKE ANY PAYMENTS? Under new rules (starting 26th November 2012), payday lenders must freeze interest & charges for borrowers on a repayment plan, or after a maximum of 60 days' non- repayment. This will affect 100 payday/short-term lenders who follow the Good Practice Customer Charter. WILL A PAYDAY LOẠN AFFECT ME IN THE FUTURE? Some mainly 'non-mainstream' mortgage lenders have turned down potential borrowers if they've taken out a payday loan in the three months prior to applying for a mortgage. If you fall behind on your payday loan repayments, you'll risk damaging your credit rating. This is likely to affect your chances of getting further credit in the medium-to-long term. Data sources www.mortgagestrategy.co.uk www.oft.goV.uke www.bbc.co.uk www.citizensadvice.org.uk www.guardian.co.uk www.which.co.uk www.guardian.co.uk www.independent.co.uk Created by www.gregorypennington.co.uk Your guide to understanding Payday loans Payday Leans FIELD GUIDE WHAT ARE PAYDAY LOANS? They are loans designed to tide borrowers over until they get paid, with amounts ranging from £50 to £1,000. They could then be used for unexpected costs like: car repairs home repairs vet's bills LOOK OUT FOR Payday loans tend to come with high APRS (Annual Percentage Rates) - usually in the thousands. However, an APR shows the cost over a year, so it's not really the best way to see the cost of a short-term loan. A payday loan could start to become a problem if: You're using one to pay off another You've taken out You're using one to pay for essentials, like food & bills. multiple loans PAYDAY LOAN FACTS 2012 IN NOVEMBER IT'S ESTIMATED THAT PAYDAY LOAN CUSTOMERST HAVE QUADRUPLED IN THE PAST 2YEARS it was estimated that 5million E MORE THAN BRITISH ADULTS 200 PAYDAY LENDERS OPERATE IN THE UK WOULD CONSIDER TAKING OUT A PAYDAY LOAN IN THE FOLLOWING 1,200,000 6 MONTHS DEOPLE IN THE UK USE PAYDAY LOANS EVERY YEAR CHARGED A PAYDAY LOAN OF 8/10 £25 £500 PAYDAY INTEREST LENDERS F100 £150 IN SAMPLED BORROWED INTEREST FOR 31 DAYS FOR EVERY COULD COSTALMOST THAT'S NEARLY £5 DAILY INTEREST KEY QUESTIONS HOW DO I FIND OUT HOW MUCHI OWE? You should get a confirmation letter e-mail telling you: • How much you owe • • The interest you'll be charged • • When the loan should be paid back • WHAT IS A CPA? A'continuous payment authority' (CPA) allows companies to take regular payments from your account. If you have a CPA set up with a payday lender and you can't afford it, you can cancel it by contacting your bank or card issuer. If your bank makes any further payments, you'll be entitled to a refund. IS A PAYDAY LOAN MY ONLY OPTION? If you need to borrow some extra cash, it could make more financial sense to extend your overdraft, or use a credit card, depending on the interest rate. Remember: you could be charged penalty fees if you use an unauthorised over- draft. Talk to your bank to find out more. WILL INTEREST BE FROZEN IFI CAN'T MAKE ANY PAYMENTS? Under new rules (starting 26th November 2012), payday lenders must freeze interest & charges for borrowers on a repayment plan, or after a maximum of 60 days' non- repayment. This will affect 100 payday/short-term lenders who follow the Good Practice Customer Charter. WILL A PAYDAY LOẠN AFFECT ME IN THE FUTURE? Some mainly 'non-mainstream' mortgage lenders have turned down potential borrowers if they've taken out a payday loan in the three months prior to applying for a mortgage. If you fall behind on your payday loan repayments, you'll risk damaging your credit rating. This is likely to affect your chances of getting further credit in the medium-to-long term. Data sources www.mortgagestrategy.co.uk www.oft.goV.uke www.bbc.co.uk www.citizensadvice.org.uk www.guardian.co.uk www.which.co.uk www.guardian.co.uk www.independent.co.uk Created by www.gregorypennington.co.uk