Payday loans 'must be a last resort'

Paydays should only ever be considered as a last resort and must be repaid after just a few days, according to Informed Choice.

Martin Bamford, chartered financial planner at Informed Choice said that many payday loans are "ridiculously expensive".

The comments follow an investigation by Which? Money that uncovered widespread bad practice in the payday loans market, including inflated APRs, poor provisions to protect privacy and potential breaches of the Consumer Credit Act.

Mr Bamford said that before resorting to taking out a payday loan, people must exhaust all other possibilities of borrowing money in the short-term, including asking family and friends or even asking for an advance on wages from an employer.

"If people do use payday loans, they absolutely must be a short-term solution because once they become anything longer than a few days they do become ridiculously expensive," he suggested.

It is essential people then ensure they have the means to pay it back to avoid taking out another one and falling into a spiral.

Moneyextra.com recommends you take independent financial advice before acting on any article

Back

2011-09-28 13:02:07 © Moneyextra.com