Who Are The Real Loan Sharks in the UK?
Many people often complain about the high interest rates that many payday loan companies and such charge, but let’s take the following situation into account. Let’s suppose for a minute that you are the average UK citizen drawing a monthly income of approximately £2000. Not bad. but not great either…especially if you are not living within your means. Anyhow, let’s also assume that after your normal living expenses such as rent, car payments, food, utilities, and care for your children…that you are way over your financial budget. In fact, your debt has surpassed your monthly income!
How is a person supposed to manage their life, much less their finances this way?
Instinct tells you that you can try to obtain a loan from a high street bank, if your credit is decent. Besides, they usually have far greater rates than payday loan companies and illegal lenders. However, here is where the majority of UK residents fall into trouble:
- 1. Traditional high street banks will not loan anyone money without a solid credit history. With the economy in such a rut, creditors and banks have tightened their lending rules. On top of that, if you have a CCJ, or a County Court Judgement, you may as well not even apply to this type of bank as you’ll be highly disappointed when they deny your loan application.
- If you happen to get approved, you will be setup on direct debit payments. It’s great that you got approved, but what if you can’t afford that payment at the end of the month? Guess what happens? Overdraft!
Under UK banks laws, when you enter into a loan agreement with the bank, you have to follow their rules and regulations. And when you dig deep into their policy statements, it can get ugly very quick in terms of overdraft fees, administrative fees, and other misc fees if you do not have the funds in your bank account. You see, once you enter into a loan agreement and declare that the bank can auto debit your account at the end of the billing cycle, you’ve given them permission to hit you up for all sorts of downright nasty charges. Wanna know what happens when you overdraft your account?
Here it goes:
- A £35.00 Administrative Fee – Basically a letter informing you of the problem
- A £28.00 Overdraft Fee – Self explanatory
- 30% APR – interest accrued on the fees unpaid.
The only cost absorbed by the bank is the cost of the letter, envelope, and stamp–which averages out to be around £5.00 or so. With these facts taken into consideration, a traditional bank has now categorized itself into the same pool as UK loan sharks!
Let me ask you a question…
Who are the real loan sharks here?
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