Payday loans have become a lifesaver for many especially in times of emergencies. Many people freak out when something comes up. They freak out and try to find ways to react, and sometimes end up putting themselves in worse situations than they were before. This is why it is important to know why you are getting the loan, and how you plan on repaying it.
Many people out there have a very negative view of payday loan. They say the interest rates are high and a person can easily get into trouble once they begin borrowing money that way. Both of these claims can be true, but not always the case. Just like everything else in life, if you choose to misuse what is normally good, then you will end up terming it as a bad option.
Channel 4 recently investigated payday loans and the video below outlines their findings –
https://www.youtube.com/watch?v=fj_pR_JRcoM
How Much More Expensive Are Payday Loans?
The first concern is on the interest rates of these loans compared to traditional loan rates. It is true that the 
rates might seem high, but if you take a closer look, you will realize why they are not that high.
When a person gets a £100 Payday Loan, it will cost him/her £20 to borrow it. One thing many critics don’t consider is the risk that comes with giving out the loan. They will say that Payday loans should be avoided on this basis.
Now, let's look at what happens when you take a car to your auto mechanic for repair. Let's say the part to be repaired costs £100 wholesale to the mechanic and the suggested retail price is £150, which he charges you. He would have made double what a lender is making within a few minutes or hours. He has no risk since you will go back again if the part fails. Payday lender has taken a bigger risk in money to people who would have been turned away by other lenders. This is the case in other businesses such as restaurants.
Don’t Fall Into The ‘Payday Loan Trap’
The second concern is the risk of getting deep into debt by borrowing against their future earnings. If you see a pair of shoes you like, would you use your credit card, or skip Starbucks in the morning and save the £5 per week until you raise the money. Many people use credit cards and they end up in debt. The only way you can avoid this is by spending less than what you earn, period.
The Daily Telegraph explored the concept of the payday loan trap in greater depth. Their take can be viewed via the following article - https://www.telegraph.co.uk/finance/personalfinance/money-saving-tips/9273169/Payday-loans-trapping-consumers-in-a-downward-spiral-of-debt.html
Unsecured are usually not for everyone. For people who cannot turn to traditional lenders, this is their best option.
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