I’ll be the first to tell you that short term loans and pay day loans should be a last resort. However, they’re there for a reason. Lots of people get mad at these companies, but the truth is, they have to comply with government regulations and be honest on their websites.
For example, everyone seems to have an opinion on Wonga, which is a loan company in the UK, but they have their interest rates displayed loud and clear on their website.
It’s kind of jarring because there are big banners advertising APR of more than 5000% in some cases. They are required to publish these due to a law which requires all loans to be advertised on a comparison basis. This forces Wonga loans, which are short-term, to be filed in the same category as longer term loans. The result? Well some argue that this forced comparison is nonsensical as it does not compare like with like. How can you compare a long term loan with a short term loan? Well regardless of fairness, the law is the law and the Wonga websites must comply with the publishing of a APR comparison. However, Wonga also publishes their own data and one of their findings is that the average borrowing term is 17 days, and the average sum borrowed is £178. Furthermore, Wonga must comply with government regulations which require strict supervision of lending and strict evaluation of those who are lent to.
Short term loans are a way for people to prevent going further into debt. However, it gets bad when people apply for loan after loan trying to stretch it until they get paid again. There are many other ways to handle financial hardships and debt before going to get a short term loan, so make sure to do all of your research and only use one as a last resort.
