Why are payday loans bad?
In order to understand why payday loans are bad, we first need to understand financial wellbeing. Financial wellbeing is a pillar of wellbeing that works in conjunction with physical, mental and social wellbeing. The four pillars of wellbeing concentrate on areas of your life that are crucial to look after in order to maintain a healthy and happy life.
Financial wellbeing is a sense of security and feeling as though you have enough money to meet your needs. Financial wellbeing means being in control of your finances and having the ability to thrive within your means. Closely linked to this idea is financial freedom, the ability to take ownership of your expenses and think beyond your day to day life.
Taking a salary advance or payday loan is not the best way to build your financial wellbeing. A Salary advance is, according to the first result in google, ‘where an employee receives a loan from their employer to cover personal needs.’ Conversely, according to the Cambridge Dictionary, a payday loan can be described as ‘an amount of money that is lent to someone by a company for a short time at a very high rate of interest.’ They sound similar right? But salary advances or payday loans don’t contribute to your financial wellbeing.
Why are payday loans bad?
Payday loans are an expensive way to borrow, they are short term but they are high-cost and are often for small amounts. Sometimes people feel a payday loan is the only option to get help before their next payday day but payday loans are bad. The interest rate on payday loans can be up to 500% making it near much tougher to pay back what you borrowed in the first place.
Payday loans are bad because it’s easy to get stuck in a vicious cycle of borrowing because the interest rates are so high you may need to borrow again to pay off previous debts. At such high-interest rates, the debt on payday loans grows very fast plunging people into more debt than they were before taking the loan out.
A payday loan isn’t a good idea because of the incredibly high-interest rates associated with them. On top of the extortionate interest rates, you can also be charged payment fees on your payday loans. These can be for missing a payment or being late on a payment, for example, £15 for a missed payment.
Hello income streaming
This is where income streaming comes in. Financial wellbeing is all about remaining in control on your money, building your savings and living comfortably whilst moving towards becoming financially free. Payday loans hinder your financial wellbeing and prevent you from working on things for your future self.
Income streaming, however, lets you get access to the liquidity you need by giving you access to your own money whenever you want it instead of waiting for payday, or worse using payday loans again. In fact, 42% of users have avoided taking a payday loan because they have Wagestream.
For a small flat fee of £1.75, you can access your money when you want it. This is not a loan so you don’t get charged interest, it’s your own money. We started getting paid monthly back in 1960 and we haven’t changed since. Everything else has gotten faster; faster cars, faster broadband, faster streaming, but why hasn’t payroll got faster?
Wagestream puts you back in control of when you get paid by letting you track your wages in real-time, giving you access to your wages as you earn them, teaching tips and tricks to better manage your money and help you save directly from your salary.
Sounds much better than a payday loan don’t you agree?