Should I Trust Payday Lenders?

There are many of us that have read information about payday loans and payday lenders that might make us very wary of them. It is always important to be cautious of all lenders, but with payday loans they are usually with less well-known companies and so even more caution may need to be used. There are a number of ways that we can find out more about them which could help us to decide which ones we feel we can trust.

Ask friends and family

It is a good idea to start by asking friends, family and colleagues about their experiences with payday lenders. They are a great place to start because they have no reason to give out biased information and they will have your best interests at heart. Find out whether they have used a payday lender, which one they used and whether they would recommend them or suggest that you avoid them. It is also important to find out why they have that opinion of them because it may be that this reason is not relevant to you. However, talk to as many as you can as it will help you to start gathering information. Do be wary of people that just tell you to avoid them all, because of things that they have read about these lenders. This is not helpful, as you want personal experiences at this stage in your research.

Read their website

The next step is to look at the websites of the lenders that you are considering. This should allow you to get more of an insight into the company. There might be facts about the company on there which could give you information that helps with your decision making. You may also find that you can get a feel for the company and what they are like, just from the way that their website is written and put together. It should also give you enough information to decide whether you like the look of the loan that they are offering.

Look at online reviews

The next stage is probably to look online to find information about them. You may find that there are websites with reviews on as well as blogs, message boards and forums with all sorts of information, particularly about the more well-known lenders. It is wise to be cautious when you are looking through this information. It could be very biased and rival companies could even write bad things about each other or good things about themselves. Review websites may even be hosted by payday lenders. Another alternative is that there could be affiliate links on sites recommending certain payday loans and they may just recommend the ones that they get paid the most for. Therefore, you need to be very careful. Look for sources of information that you trust and also think about whether what they are saying seems realistic. Although, this is not the best way to find information, if you have very little else to go on, then it will at least give you some information that will help you with making your decision.

Get in touch with customer services

It can also be worthwhile to get in touch with their customer services department. This will allow you to actually see what they are like at responding to questions. You will see how fast they are, how polite and how useful and this can be an important factor when choosing between lenders. It helps you get a feel for what the company is like as a whole and you will know; if you have questions and queries once you have a loan, if they will be good at helping you out with them.

Conclusion

It is easy to have a general mistrust for payday lenders because of the things we hear about them in the press. However, if you need a quick loan and have a poor credit record then they may be your only option. This means that you will want to find one that you can trust. Doing the things mentioned above should help you to choose between lenders and hopefully you will be able to find one that you trust. It is worth remembering that although cost of loan is a big factor, trusting the lender should be as well. This means that you may have to be prepared to pay a little more money in order to get a loan from a lender that you trust. You may feel that you should be looking to pay as little as possible, but peace of mind can be worth paying a bit extra for. Consider how much more it will be and whether you feel that this is worth it. This is a very personal decision but may also be determined by how much you can actually afford to repay. It is so important to make sure that you can afford the repayment as if you do not you could end up having to pay significantly more in interest and/or extra fees.

Will an Increase in Interest Rates Make my Payday Loan Dearer?

When the Bank of England increase the base rate then those that have loans or are considering loan may start to worry that the rates that they are paying or will pay will go up. It is not surprising that we worry as no one wants to pay more than they have to or get into trouble financially if the rates are too high. All loans could potentially be affected by this and so it is worth being cautious.

What if I have a payday loan?

If you already have a payday loan then it is likely that you will not be affected by a change in the base rate. Payday loans tend to have fixed interest rate and so this will not change if the rates go up. As the loans are generally repaid within a few weeks of the money being borrowed, a rate change will not have a significant impact on a borrower and therefore they will be unlikely to pass it on to them.

If the loan is not repaid when required then there will be extra interest to pay. This will usually be at a higher rate than you paid before and there is a chance that this could be variable and may go up when the base rates go up. Hopefully, you will pay the loan off in full and so this will not be something that you will have to pay. However, it is worth checking so that you are aware of whether this might be a cost that could go up. It may even help to motivate you, to make sure that you have enough money available to repay the loan in full, when you need to.

What if I am considering a payday loan?

If you are considering a loan, then you may find that the rates change as the base rate goes up. Payday loan rates are usually quoted as AER which is a rate that includes the fees of the loan as well as the interest rate. This will mean that most of the rate is actually in fees which will not change when the rates change. As the loan is likely to be relatively small, a rate change may not actually make a great deal of difference to the price anyway. The rates also tend to be pretty high and so they may not bother increasing them if the base rate goes up anyway.

It is worth making sure though, that you are not paying more than necessary when you take out your payday loan. There are many different lenders and it is well worth comparing them to see what different rates they have. If you use the AER to compare them then this will allow you to compare them on a level playing field. Alternatively, you might prefer to put in details of how much you want to borrow and how long for and get a figure of how much you will have to repay and compare that. You might find that easier to relate to. It is important with any lender, that you remember that the cost is not the only factor you should be considering though. There are other things that are important as well. You need to consider, for example, that the lenders will differ in their reputation, how they treat you, what their customer service is like and things like this. You need to make sure that they will still provide good value for money by finding out a bit about them before you sign up.

Conclusion

So it is tricky to say whether an increase in interest rates will make your payday loan higher. It is unlikely to matter if you have already taken out the loan but if you are considering one, then it may make a difference. With all loans it is important to compare lenders in order to work out which will be the best for you and so you need to do this with a payday loan as well. You can avoid the effects of a rate increase if you find a loan which is cheaper but it is worth taking some time to check and see whether you think that it will offer you good value for money. It can take time to do this and often, when we want a payday loan, we are in a hurry. However, it is worth taking the time to do this because you will then be able to know that you have made a decision based on information that you have looked at. This is important because it means that you will not have any regrets as you will know you made the best decision that you could at the time. It should not take that long and it could make a big difference to you financially.