The rising cost of housing has forced at least 1 million UK citizens to try a payday loan. The penalty clauses and terrifyingly high interest rates of payday loans can create terrible debt problems. A debt management plan is all-too-often sought to help such debtors work their way out of debt.
Debt management plan experts speak of debts falling into 2 types. The 1st kind is a "priority debt". They are described as priorities because, if left unpaid, you might lose access to essential items and services like electricity, mortgages and gas. Any debts which concern payday loans, credit cards, bank loans and overdrafts are seen as less crucial than priority debts and are consequently known as "non-priority" debts.
As many payday loans are payable at a concrete time and involve significant sums, they are highly stressful. This unfortunate mixture makes payday loans an extremely high-pressure variety of debt. Debtors are likely to repay their payday loan at the expense of their priority loans due to this pressure - landing them in lots of trouble.
So what's next? Debtors are naturally concerned about the outcomes of not paying their mortgage or rent, so they'll often source yet another payday loan to be used for the payment. It is common to see payday loans with 3000% APR interest rates which makes the problem even worse. Unfortunately this is a situation debt management plan advisers see all the time. Every unmanageable debt requires another unsecured loan to pay it off which, in turn, requires another payday loan to handle.
Mortgages, gas and electricity are not the sole reason people get a payday loan and then find themselves needing the debt management plan. One popular consumer journalist recently detailed his own experience of taking out a small payday loan as an experiment.
The journalist found that, once he repaid the loan, he was inundated by payday loan advertising. The payday loan advertising teams hounded him relentlessly, offering him loans by post, email, phone and text. He was offered a promotional loan for his birthday ("... enjoy your birthday worry-free"). He was also offered incentives to sign up his friends for payday loans.
In a tough financial time, where rising numbers of people are struggling to pay priority debts or resorting to a debt management plan when circumstances become too tough, this level of marketing by payday loan companies will obviously create financial problems and debt distress for many years to come.
Payday loans should categorically not be used if you are currently struggling with debt. Extra lending with a massive APR can only make things worse as the fact that you require it in the first place almost inevitably means you are going to struggle to repay it. If you are in a situation where you have debts and are finding thing hard financially, the first thing to do is to break the debt cycle. Starting the debt management plan is one way to implement this break, but there are many other ways which can help depending on your circumstances.
As many payday loans are payable at a concrete time and involve significant sums, they are highly stressful. This unfortunate mixture makes payday loans an extremely high-pressure variety of debt. Debtors are likely to repay their payday loan at the expense of their priority loans due to this pressure - landing them in lots of trouble.
So what's next? Debtors are naturally concerned about the outcomes of not paying their mortgage or rent, so they'll often source yet another payday loan to be used for the payment. It is common to see payday loans with 3000% APR interest rates which makes the problem even worse. Unfortunately this is a situation debt management plan advisers see all the time. Every unmanageable debt requires another unsecured loan to pay it off which, in turn, requires another payday loan to handle.
Mortgages, gas and electricity are not the sole reason people get a payday loan and then find themselves needing the debt management plan. One popular consumer journalist recently detailed his own experience of taking out a small payday loan as an experiment.
The journalist found that, once he repaid the loan, he was inundated by payday loan advertising. The payday loan advertising teams hounded him relentlessly, offering him loans by post, email, phone and text. He was offered a promotional loan for his birthday ("... enjoy your birthday worry-free"). He was also offered incentives to sign up his friends for payday loans.
In a tough financial time, where rising numbers of people are struggling to pay priority debts or resorting to a debt management plan when circumstances become too tough, this level of marketing by payday loan companies will obviously create financial problems and debt distress for many years to come.
Payday loans should categorically not be used if you are currently struggling with debt. Extra lending with a massive APR can only make things worse as the fact that you require it in the first place almost inevitably means you are going to struggle to repay it. If you are in a situation where you have debts and are finding thing hard financially, the first thing to do is to break the debt cycle. Starting the debt management plan is one way to implement this break, but there are many other ways which can help depending on your circumstances.
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