Payday loans are a type of short-term loan that can help people cover emergency expenses until their next paycheck. Although there are currently no restrictions on the interest rates payday loan companies can charge, the government is considering new legislation to limit the costs of such loans. Payday loan advertising is subject to the Consumer Credit (Advertisements) Regulations 2004. It's important to understand that payday loans are an expensive way to borrow money. Borrowers should never apply for a payday loan unless they are sure they can repay it on time and in full, as costs can quickly spiral out of control.
The Financial Conduct Authority (FCA) has set rules that limit the amount of interest and default charges that can be charged on a payday loan. For example, someone who applies for a 30-day loan will pay no more than £24 in fees and fees for every £100 borrowed. Research has shown that more than half (59 percent) of customers said they couldn't have run out of the item they bought with the loan, but 24 percent of this group later said that if there were no payday loans, they would have been left without them. Payday loans are often seen as a “quick fix” to cover deficits in rent deposits or other urgent expenses, but they should only be used as a last resort.
Banning payday loans does not always have a purely positive effect, as studies conducted in all 12 US states have shown. In some cases, it can leave people without access to emergency funds and vulnerable to costly overdraft fees or returned checks. Payday lenders advertise their loans as a way to deal with every cash flow crisis you can think of, but they are designed for emergency use only and should never be used to try to solve a long-term money problem. The people who are most likely to turn to unsecured loans are those who cannot easily get credit elsewhere, hence the often used name, bad credit loans.
Payday lenders have long been the target of consumer groups and regulators for providing unbearably high-interest loans to those who can least afford them. Like many other online payday loan services, viva offers a simple and simple application process. However, if payday lenders charged the same rates as long-term loans, they would not be able to help people who rely on payday loans for emergencies.