Thursday, June 26, 2008

Loan Sharks

The ongoing drought of cheap loans and mortgages is forcing already heavily indebted people into the arms of loan sharks, who charge interest rates up to a staggering 1000%.

Known as "pay day loans", they are taken out by the hapless debtor to provide short term cover until pay day.

The Times reports that the number of deals taken out in the UK has risen by more than 130% since last August.

Payday UK, Express Finance and Pounds Till Payday offer loans of up to £1,000. Payday UK demands that £125 be repaid for a £100 loan, or £937.50 for a £700 loan. The loan is usually paid off within a couple of days, as soon as the borrower's wages are paid into their account.

Payday UK has a typical APR of 1355%.

Needless to say, by borrowing money at such extortionate rates of interest in this way, the hapless debtor is in fact making his/her situation far worse than it already is.

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