Third of Payday Loan Borrower Unable to Afford Interest Payments
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Almost third of the payday loan borrowers borrow the amount to meet instant money requirements knowing that they cannot afford the interest payments. Half of pay day loan debtors are in almost worst financial situation at the time of borrowing payday loans. Families with hard cash turns towards short term loans with higher rate of interest up to 4214 percent to pay off bills rent payments and even to buy food items. Financial studies clearly say that 48 percent of borrowers find that they cannot afford to pay back the amount.
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Borrowers have also revealed that debt collection companies threat them for payments in last 12 months. Richard Lloyd, the executive director has said that it is really shocking to see that almost half of payday loan borrowers have failed to pay it back and in most cases due to high rate of interest. It is depressing sign of the times where almost one in three borrowers is harassing by debt collectors since past one year.
Several people found themselves in debt trap due to payday loans and individuals are borrowing more debts just to meet the repayments of previous one. Borrowers are also face threats of penalty charges and late payments. Debt experts suggest that it is better to borrow secured logbook loans as it is available with flexible terms and lower rate in compare of payday loans.
The Office of Fair Trading should take essential steps to regulate rate and terms of payday loans to save borrowers from excessive financial burden and collection threats. Clear charges and better affordability assessments must be maintained at priority basis to provide better protection to consumers and clean up to industry. Survey reports also revealed that people use credit cards over payday loans but still 38 percent of people accepted that they borrow payday loans to manage their expenses.
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