Payday loans – your complete guide
If you are a bit low on cash and an unexpected bill arrives – it can leave you in an awkward situation. You may be tempted to ask your friends and family for a loan, but this can be embarrassing and most people don’t really like this option! Another choice is to take out a loan or credit card from your bank, but if you have a low credit score, this can often be impossible. However, there is another option, in the shape of a payday loan.
What is a payday loan?
A payday loan is for short term funding needs and is designed to be paid back on your next pay day. It is ideal for occasions when an emergency bill arises and you don’t have access to funds to pay it. It can also help for special occasions when you don’t have any spare cash. Many people find a payday loan useful for tiding them over until they get paid again and although these loans tend to have a high interest rates, they are cheaper than other options, such as unauthorised overdrafts and some credit cards.
Who can apply?
If you have a UK bank account, you are over 18 and you reside in the UK, you can apply for a payday loan. There is no guarantee that you will be accepted for the loan. However, it is generally a lot easier to get accepted for a payday loan than a bank loan or similar. In some cases, the payday lender won’t even carry out a credit check.
The application process for a payday loan is generally quite quick and easy – it shouldn’t take longer than a few minutes. As part of the application process, you will be asked for your personal details; including your employment and income. This will be used as part of the credit check or decision making process. You can also decide how much you want to take out for the loan, and the scale will usually be from as little as £50 to several thousand pounds. It is unlikely that you would be accepted for a high value loan, unless you have already had payday loans with the lender before. You also decide on the duration of the loan; anything from a few days to a month. The interest paid on the loan will be determined by the value and duration and these will be transparent on the application. The decision will be made on your application and if accepted, you will usually be paid into your account on the same day or the next working day.
Paying it back
Your payday loan will be automatically debited from your account on the specified date. However, you can pay it back early and this is recommended; as your interest rate will be lower if you do this. If you need an extension on your payday loan, it will be at the lender’s discretion. You should always get in touch with the lender, if you are having difficulties paying it back, as they will be able to help. If you ignore it, you will end up with higher charges and your credit rating will be adversely affected.
Benefits of payday loan
There are many benefits to payday loans, especially if you can’t get credit elsewhere and you need your funds quickly. They are quick and easy, and your funds are usually available on the same day, so these are ideal for emergencies. The application forms don’t take long to complete and the criteria is much less strict than other financial institutions.
Although there are benefits to payday loans, you should be wary about taking these out, as the interest rates are higher than many other types of loans. You should ensure you can pay it back on your next pay day, otherwise you could find your financial situation a lot worse. It is important to work out your budget, before you take out a payday loan and what you can realistically afford to pay back. You should not consider payday loans as a source of income, they should only be used in emergencies, when there are no other options available. Payday loans can be great, if you manage them in the right way. As long as you do this, they can be useful for emergencies.