Payday loans have an extremely bad rep, and is this justified? According to the Consumer Federation of America, on average, a payday loan company charges you about $17.50 for every $100 you borrow from them. Not so bad, really – that works out at 17.5% interest, which can be even better interest rates than on a credit card.
The real doozie comes later: saving up to pay off the debt, plus interest is bad enough and can take some time, but your 17.5% interest term only tends to last a fortnight; after that, you get another 17.5% chucked on top. Leave it another 30 days and you will find yourself with – yup – another 17.5% charge. It all starts to mount-up eventually.
Payday loan companies are the crooks of the credit industry, and it’s not hard to see why. However, a new payday loan company called ‘fridayfriday.com’ believes it has come up with an ethical service for borrowers: they promise to curb rollover loans and step down intimidating debt collection.
Finally, it seems like people will be able to pay off their car loan comparison fees and meet their mortgage premiums without finding themselves lumped with lifelong debt. But is this really as good as it seems?
Although its name just reminds us of Rebecca Black (much to our irritation), this company seems to be aiming to provide an almost-ethical service, rather than a poorly disguised trap to get people into debt. Out of every £100 loaned, they charge £25, but they have a maximum of three consecutive loans. After this, FridayFriday puts the borrower on one loan, and freezes interest rates at 30% for six months. [Read more…]