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Payday Loans

In recent times, it has become difficult to watch TV, listen to the radio or even browse the internet without being bombarded by adverts for payday loans. You might be tempted by this seemingly easy way to get cash fast, but before you sign on the dotted line, think carefully about how much it might cost you in the long run.

Check the interest rates!

Payday loans can charge an eye watering level of interest, in some cases up to 5,000% APR. This might be manageable if you are able to pay the loan back in a very short space of time but if for whatever reason you can’t, your charges can spiral very quickly.

Payday loans can harm your credit rating

Regardless of whether you repay them on time, using payday loans can be a red flag to any company you approach for financial help. This is because most organisations will look at your past record; you credit report, when deciding whether or not you are able to meet your existing commitments.

This might not only affect your applications to borrow larger amounts of money, such as a mortgage or personal loan, but can also impact on your eligibility for mobile phone contracts, car insurance or extensions to your overdraft facility.

So what can I do instead?

Look at your budget
If you take out a payday loan to bridge a gap this term, will you just be in the same position next term? This might lead to a loan cycle that you could find hard to get out of.

Sit down and have an honest look at your incomings and outgoings. What might you be spending too much on? Where can you make some savings by cutting back, changing providers or using discounts? Try using the online Warwick Budget Calculator to help you with this process. You might find the answer to your money problems here.

Are you getting all of the financial help you are entitled to?

If you still can’t make ends meet, have a look at other sources of financial help you might qualify for such as scholarships, bursaries or hardship funds. In some circumstances, such as if you are a lone parent, part of a student couple or you have a disability, you might also qualify for Government benefits. Contact the Student Union Advice Centre for further information about benefits.

If you are able to, part-time work can be a great way of boosting your income and gaining some really valuable experience. Try Unitemps for job opportunities on campus and in the local area.

What can you give up to cover the cost?

By giving up that daily coffee, for example, you might find that you have enough to cover the expense. It also might make you question whether what you want is really worth it.
Use the money mantras:
  • Do I need it?
  • Can I afford it?
  • Can I get it cheaper elsewhere?

If the answer to any of these questions is ‘no’, think really carefully before you buy.

Look at the alternatives

If you encounter an unexpected financial emergency, before committing to taking a payday loan, check that you can’t get cheaper help elsewhere to cover your costs. For example, can you temporarily extend your overdraft facility, borrow from a friend or use a credit card (provided you can pay it off in full before interest becomes payable). In certain circumstances, the University can lend money to students experiencing a financial emergency. See Emergency Loans from University Hardship Funds for more information.