Money problems are extremely common these days. Whilst some families turn to sites such as the Money Advice Service to help solve their financial issues, others take out loans left, right and centre, falling deeper into debt. Whilst quick fix cash might seem appealing - particularly if you’re struggling to make ends meet - this type of borrowing can actually cause more harm than good. Let’s take a closer look at why saving is key and payday loans are bad.
Why are payday loans bad?
According to a report by the Centre for Social Justice, household debt has doubled in the last decade with the average household now owing around Â£54,000. While the global financial crisis certainly made it harder for families to get by, due to a stunted economy and stagnated wages, the fact that we are encouraged to borrow more and save less have made things considerably worse.
Payday loan companies, for instance, seem to be everywhere and often target people in desperate financial need. These loans are designed to offer a short-term solution, so the interest rates tend to be through the roof, making it difficult for people to pay them off in time. As soon as payments are missed, additional interest rates and fees are added causing the debt to spiral. Of course, if you’re already in a tough financial situation to start with, this can be even harder to resolve and your debt rapidly increases.
How can I minimise my debt?
Thankfully, payday loans are not the only way to get out of a financial hole. If you are having problems paying bills it’s always advisable to speak with the relevant people, be it your landlord or mortgage lender. They’ll appreciate your honesty and might try to come up with a more realistic payment scheme for you to stick to. Being open and frank about your situation will take the weight off your shoulders and prevent you from getting into trouble with payday loans.
If you are in debt, it’s also worth making cutbacks wherever you can, such as cancelling that expensive gym membership or magazine subscription. There are many other ways to save money too, so take a good look at your incomings and outgoings and see where you can make changes. As well as reducing the amount you spend, it’s also worth setting money aside for a rainy day, even if it's just a couple of pounds a month. Sure, you might have bills that need dealing with urgently, but once you’re in a more comfortable situation, try opening a savings account and making regular deposits. Every little counts and before you know it, you could have a nice little nest egg.
Saving is one of the best ways to achieve financial security, so avoid payday loans and other quick fix measures if you possibly can, and let the pennies turn into pounds.