In a brilliant marketing ploy that is sure to get it plenty of press coverage as well as see other lenders copying the move, Instant Loans Direct is offering interest free payday loans to all new borrowers from the end of November until March next year.
There’s a catch of course, you can only have your interest free loan for 8 days and should you default, the interest will be back dated to the start of the loan rather than from the 9th day.
They are offering interest free payday loans from £50 up to a maximum of £300 to anyone who earns £750 or more per month and if you don’t pay it back at the end of the 8 days then you are charged interest at a rate of 50 pence per day for every £100 you borrowed – A 448% APR.
So why are Instant Loans Direct offering interest free payday loans? Many borrowers go on to become repeat customers and the offer ends in March so they will be hoping a good number of the consumers they have attracted will stay with them after the offer period ends.
This is made clear by the fact that they are only offering these free payday loans to new customers – Why offer them to people they have already captured?
Of course they also know people will be tempted by the offer of a free payday loan even when they know they have little chance of paying it back before the 8 days is up and so they will make money on these defaults.
Consumer Credit Council spokeswoman Una Farrell told This Is Money:
‘This 0 per cent offer is a very cynical way of lulling people into a false sense of security. Once the period is over, borrowers will find themselves racking up enormous rates of interest which many will not be able to afford to repay.’
‘These loans are a quick route to a debt problem. Payday loans are toxic and people need to look for cheaper forms of credit such as a credit union loan or money advice if they are struggling to make it to the end of the month.’ Source
A bit over the top maybe but you get the point. Payday loans were designed to cover an emergency if you found yourself short. The lenders realised people were being charged fortunes by the banks for going overdrawn but didn’t have an option to borrow small amounts of money and so they stepped in to fill that gap in the loan market.
What they are not designed for is to keep you going each month. If your monthly outgoings exceed your income then clearly payday loans are not the answer because of the interest rates charged. Even one of these interest free payday loans is going to make matters worse because your shortfall next month is going to be even worse than this one once you have paid it back.
If you are in this situation you need to break the chain. Create a budget so you know where your money is going. The lender offering these interest free payday loans is actually owned by H&T Pawnbrokers and this or any other pawnbroker can be a better way to borrow money if you are struggling with debt rather than just short for a month.
Because you are using something as security on the loan you will get a much better rate of interest and most pawnbrokers give you a full 6 months to pay it back. Should you fail to settle the debt then you lose the item you pawned but at least you are not accruing interest charges on a daily basis.
On the other hand, if you have simply been caught short and you are looking for a loan because you have a direct debit due just before your salary then clearly one of these interest free payday loans from Instant Loans Direct is going to be an option that for the moment at least is hard to beat.