Emma Lunn, Thursday May 22, 2008
Discover the specific dangers
Debt danger 1: Payday loans
Experts have warned against the dangers of payday loans which lend money at APRs of up to
1355%. The loans are basically cash advances on the salary borrowers are expecting at the end of
the month. Most firms charge £25 per £100 borrowed - providing that the debt is repaid within 30
days.
The debt can spiral if it's not paid at the end of the month and people regularly relying on these loans can get caught in a cycle of debt. Payday loan companies have been accused of targeting young vulnerable people by advertising on social networking site Facebook.
Debt danger 2: Debt management companies
These companies typically offer to reduce your payments to one "affordable monthly amount".
They negotiate with creditors on your behalf and, if successful, you only have to make one payment
each month to the debt management company who will then divvy it up between your creditors.
However, these firms charge a hefty fee for services that can be found elsewhere for free. Also, setting up an agreement with one of these firms does not guarantee that action won't be taken against you by your creditors.
