The benefits of payday loans
If you find yourself in a financial emergency in the middle of the month and you’re wondering how you can make it to your next payday, it can be difficult to know where to turn. You might not be able to ask family or friends for help, for whatever reason, and increasing your overdraft can just lead to ongoing charges.
Payday loans could be the answer you are looking for. These are small, short-term loans designed to help you with temporary cash shortfalls and emergency payments like repairs. When used properly, they can get you out of a tricky situation while avoiding bank charges or returned Direct Debits.
Here are some of the main advantages of payday loans:
Easy and quick to apply
Payday lenders and brokers usually offer a fast and straightforward application process, meaning you can usually apply within minutes and get a reply the same day; and you’ll often get the loan in your bank the same day too. For example, Payday Pixie has a 5-minute application form and can often transfer you the money within 15 minutes.
Payday lenders will usually display upfront pricing and costs, including interest rates and calculators showing you how much you will need to pay back. This means there are no surprise charges or hidden costs and you can plan ahead for payday safe in the knowledge that you can afford to clear the payday loan balance in full.
The amount of loan you can borrow is usually fixed to your income and expenditure, meaning you can never borrow more than you can afford to pay back. This stops you falling into the cycle of debt; take out the loan, use the money to cover your emergency and pay it back on the next payday.
Caps on borrowing
New UK rules that came into play in 2015 have set realistic caps on the amount you can borrow and will have to pay back. Interest and fees have been capped and default charges have a limit too. On top of that, the total cost of fees and interest is capped at 100% of the original loan amount, meaning you’ll never pay back more than twice of what you originally borrowed.
Unlike other kinds of borrowing, payday loans are flexible to suit your needs. You can borrow a small amount for a specified period of time, which you are unable to do if you borrow from high-street banks. Increasing your authorised overdraft can seem like a good quick fix, but the problem is that we rarely reduce that amount once we’ve covered the emergency expenses.
That means that we’re constantly butting up against our overdraft limit and incurring the associated charges every month. With a payday loan, you know that it’s a short-term solution that will be cleared on your next payday.
Many payday lenders have more availability than other lenders. That means that if your emergency occurs outside of normal working hours, you’re likely to be able to still get the funds you need. Most payday lenders have an automated system online meaning that you don’t even need to wait in phone queues to organise your loan.
This is great if you have an unexpected car breakdown at 8 in the evening, for example. Older styles of borrowing would have meant waiting until after 9am the next day to sort out help, having a knock-on effect on getting to work, taking the kids to school and such.
With the convenience of payday lending, you can sort out the funds in the evening of the breakdown, from the comfort of your own home, knowing that you’ll be able to get everything sorted out first thing in the morning.
Finally, many payday lenders can still lend you emergency cash if you have a poor credit score. This is because the loan is issued on the basis of your income and your affordability to pay it back. Even if your credit score is poor, you might still be eligible for help through payday lending; help that you might not be eligible for through other lenders such as high-street banks. Payday loans give you greater scope, even if you have had issues with credit in the past.