Payday Loan compared...

According to PKF, a business and accountant advice firm, there is a record number of people facing insolvency this year. This is set to increase the demand for payday loans. Many of these people will be Scots who took out a Protected Trust Deed. Around 22,000 Scots took out this deed and it is expected that even more will be faced with insolvency this year. This is partly down to government spending cuts and potential job losses that could occur in the public sector.

The corporate recovery partner at PKF, Bryan Jackson, commented:

“Although we appear to be emerging from the recession, it is clear that the after-effects will continue to be felt in the wide economy for several years to come. There is already evidence of an increased take-up of payday loans and other products from high interest lenders which only temporarily put off the inevitable. People should take a serious look at their finances and consider whether adding to their debt is really the answer.”

It is thought that the housing market is not due to be fully recovered until 2012. However, it is expected that the interest rates will rise again this year. VAT has already gone up and this is already pushing people to the limit of their budget.

The trouble is, as people turn to payday loans to solve their financial problems, it leads to the risk that they will end up in even further debt. Payday loans are great for short term problems. However, when unemployment and higher interest rates are to blame for people’s financial troubles, the problems are not going to be short term. Therefore you could end up applying for a payday loan every month.

For those who are in financial trouble, long term payday loans may be an option. Some lenders understand that not everybody will be able to repay the debt within a month. Therefore they offer repayment plans that run for a few months. These longer term payday loans are not common but you can find them if you try. It is also possible to extend the term of your current payday loan with some companies; particularly if you manage your account online.

If a problem does arise then it is a much better idea to talk to the lender and ask for an extension than to simply not pay up. The interest rates on payday loans are ridiculously high. One missed repayment could send you hundreds of pounds into debt.

Overall the increase in insolvencies this year is likely to have a knock-on effect with payday loan lending. The H&T Group is also expecting a boost in profits this year following on from record borrowing levels in 2010. The company specialises in payday loans and unsecured loans. As well as payday loans, consumers are also looking into other ways to get the money that they need and trading in their old gold is just one of them. Only time will tell whether there will be even further job losses thanks to public spending cuts. If there are then payday lending will see another boost in popularity by the end of 2011.