High Interest Rates
The main concern with regards to payday loans, for most people, is the high interest rates. The payday loans have higher rates than most other lenders. This means that they should only be used if you cannot borrow money from somewhere cheaper. An overdraft or credit card can also offer short term funds and can be very much cheaper if you repay them quickly. However, many people who use a payday loan do not have these alternative options.
As well as interest there are also fees to pay on a payday loan. Many are organised very quickly, which is useful for people who need money in an emergency. However, to be able to provide this service they have to pay staff to be available all of the time and they pass this cost on to the borrowers by way of fees. How much is charged will vary form company to company.
High Late Fees
If you do not make the repayment on the nominated day, by the nominated time, then you will get charged additional fees. This can increase very quickly. Some will add on extra charges daily and some may even do this hourly. This can suddenly make the fees and interest higher than the loan itself. It can get out of hand and make it even more difficult to repay in full.
It is felt that it is unfair to charge so highly so quickly and that these terms should be changed. It is also not always that obvious how much the charges may go up if a payment is not made and so it is felt that this should be made clearer. It is generally felt that the charges are too high though and that they should be lower as well.
Lend to the Most Disadvantaged
Another problem that people have with payday loans is that they target people who are already in financial difficulties. By not running credit checks they will lend to anyone. This means that people who cannot get cheaper loans elsewhere will get a payday loan instead. The charges are higher because the customers are a higher risk, but it means that they have the risk of paying extremely high fees and interest if they cannot repay. They are more likely to not be able to repay than those with a better credit rating. It is felt that it might be better to just not lend money to these people, so that they do not get themselves into more trouble financially. However, the payday loans companies see it as a service that they are providing to get much needed funds to those that cannot get money from anyone else.