People use payday loans as a means to tide them over to their next pay cheque in a wide range of situations. For example, they may rely on this type of credit if they are short of money to cover expenses such as rent or mortgage payments and food costs, or if they encounter unexpected expenses like car or property repair bills.
More people may be turning to these short-term loans as the pressures on consumers’ finances continue to rise.
According to figures from the Office for National Statistics, when adjusted for inflation regular pay dropped by 0.5 per cent year-on-year in the three months to May. This came after a fall of 0.6 per cent in real pay in the three months to April and a 0.4 per cent year-on-year decrease over the three months before that.
Rising levels of inflation and stagnating wages mean many households now have less, if any, money to spare each month. Inflation hit 2.9 per cent in June, which was up from 2.7 per cent the previous month and was considerably above the Bank of England’s target of two per cent.
With the prices of goods and services increasing relative to pay, more people may struggle to balance their budgets and this could result in an increase in applications for payday loans in the UK.
Public sector workers under strain
Workers in the public sector may be among those who are especially likely to need short term loans. There has been a lot of attention on public sector pay restrictions over recent weeks, with the government under pressure to lift pay limits first imposed in 2011-12. Since a two-year pay freeze starting in 2011-12, rises have been limited to one per cent.
According to an analysis conducted by the Trades Union Congress, firefighters, nurses and border guards may all see their real wages decline by more than £2,500 over the next three years if the pay restrictions remain in place. Meanwhile, the National Union of Teachers suggested that teacher pay has dropped by around 15 per cent in real terms since 2010.
Decreases in inflation adjusted earnings like this could make people more likely to approach payday lenders seeking short-term loans.
Could a payday loan be the right option for you?
Regardless of the sector you work in, if you’re short of money, you might be considering taking out a payday loan. Whether you need cash to cover a particular expense such as a bill or you simply need some extra money to help you meet your general living costs, these loans could offer a solution. One of the benefits of these products is the fact that they can be easy and quick to access, even if you have a bad credit history. If your application is approved, you may be able to receive the money the same day.
However, it’s important to realise that these financial agreements are only suitable if you want to borrow small sums of money. If you’re applying for a loan through Swift Money, you can request up to £1,000. If you require a larger sum than this, you will have to consider other options, for example taking out a personal loan. Also, bear in mind that payday loans tend to have higher interest rates than alternatives such as personal loans and the repayment terms are shorter.
Before you sign up to one of these products, make sure you have shopped around to find the best payday loans on the market. It’s also important that you’re confident you can meet the repayment terms set by the lender.