When looking to borrow money many people have concerns as to whether or not it is safe to do so online. How do you know if you can trust a lender and that you are not going to get charged through the roof interest rates end up in hock to what could be an illegal money lender or a loan shark.
Payday money lenders need to be licensed by the OFT the office of fair trading, they need to have a credit license in order to be able to lend money and provide credit. If your lender is not regulated then they are not legally allowed to lend you money in the UK. Doorstep lenders and loan sharks will not have a consumer credit license and so if you borrow from them you are not protected and they are acting illegally.
It is important to remember that payday loans companies are businesses and not charities. They are in business to make profits and so will only lend to people that they believe are able to repay the loan, unlike illegal lenders they want you to repay your loan as quickly as possible. Illegal lenders will not want you to repay the loan and try to keep you in hock for as long as possible.
The amount of interest charges on payday loans is higher than that of the high street lenders. The reason for this is that these types of loan are more risky for the lender and are more available to people with a poor credit rating. These types of loan should only be considered as an emergency form of lending and not as a regular way to borrow money.
If you are on a tight budget and find that you are regularly struggling with money you should contact the consumer credit counselling service or your local citizens advice for advice. You can also find some good clear general financial advice from the government at their money made clear website.