Everyone knows that things are still very tight in Ireland financially. The economy is sinking deeper and deeper into trouble with each passing day and there doesn't appear to be any light on the horizon. This has led to an increase in the amount of lenders offering pay-day or short term loans in Ireland, as they try to appeal to those who need a quick cash fix.
While short term loans, often called payday loans, might seem like the ideal solution to your problems, it's worth sitting down to do a little research about how they work and how they are best utilised.
On paper they seem relatively risk free. Lenders offer customers small loans over a very short period in order to entice them on board. Loan amounts are generally between €100 to €500, and can be issued on a weekly or bi-weekly basis - in some cases they may be longer, but this is relatively uncommon, and not the type of easy business these places desire.
Although the loan amount may be small, the interest you'll incur on it certainly isn't. Just like established banks, the way pay-day loan institutions make their money is from interest. Rather than offering relatively low interest rates over long periods of time like regular banks and lending institutions, the aim of the pay-day loan is to give you your loan, tack on a large amount of interest, and have it all paid back in as short a time frame as possible.
For many people, this is fine, however there are some in dire financial straits whose situation this will only worsen. Think of this following scenario... you are working a poorly paid job and an emergency arises. It may not require much money on your part, let's say €200, but it's money you simply don't have, meaning your only choice is to take a payday loan. You agree to the terms, and take out €200 with an interest of 20% (for example). Payday rolls around and you find you owe €240, but can only afford to pay €60. The interest rolls over to the next week, and you now owe €210. Again you can only afford €60 the following payday, so with interest the loan is at €180 - that's after two payments of €60 on a €200 loan!
Using this example, you can now see why these loans are only to be used is you are absolutely positive that you can repay them in a timely manner and comfortably absorb the interest payments.