Payday loans are tempting people who are struggling to meet their family's commitments by offering them the chance to borrow money just to keep themselves going until pay day. Typical adverts tell borrowers that they can “free up” cash without any fuss or bother. Most borrowers are after relatively small amount for just a few days or maybe a week or so and repay the debt from their next pay packet.



At holiday-time, children's birthdays and Christmas time, parents are particularly likely to be tempted to raise some money, knowing they can pay it off shortly. Why wait – it's their own money they're using and their own wages will pay it back. But what about the interest they'll be paying?

One firm offers loans of up to 750 pounds, and the cost of borrowing that is typically at an annual percentage rate (APR) of getting on for 2,000 per cent. It's completely open about it and its website lists the APR. When we looked it was 1,845. The charge is 25 pounds per 100 pounds borrowed on-line. The arrangement for repayment is that there is an automatic payment via the borrowers debit card on the date agreed at the start of the loan. If a loan needs to be deferred or increased, then additional charges will apply.

To anyone desperately needing the money, it may seem a reasonable amount. A simple cost of say 50 pounds to be able to use 200 pounds – enough to book a flight ticket maybe, or buy the children's Christmas presents, may not sound too bad. However, if the loan was longer term it would cost an unbelievable amount in interest.

Which?, the consumer organisation say that “Payday loans are bad news on so many levels. Before you take out a loan, check to see if you are eligible to join a local credit union.”

As we said, in the UK, the sky's the limit when it comes to the amount of interest that lenders can charge. However we have the Financial Ombudsman Service, who can reflect on complaints regarding credit agreements, their sale, their fee transparency, interest rates and the treatment of any complaints customers may have made to the lender. However, these types of loans are only a fraction of the complaints considered by them. Whilst incomplete information or information which is misleading would be a cause for investigation, a complaint about the high interest when the interest rate was clearly demonstrated at the time of taking the loan would be unlikely to be upheld.

The alternative way when it comes to a short term small loan is via a credit union. Generally eligibility to join one is by having a common bond with other members. This may be residence in a particular area or employment by the same company. There is a limit to the rate they can charge for borrowing although many charge less than half of that rate.

This is far better than using payday loan firms or doorstep lenders. You can make enquiries about finding a local credit union by calling 0161 832 3694 or going online

For help with any type of loan, contact an independent loan advisor – you'll find one on-line. They'll be totally aware of all types of products and will know the very best deals that are available, at the best possible rates.