Payday Loans – A few questions answered
A payday loan is a short-term loan of up to £1500 and is designed to bridge the gap between the day you run out of money and your next payday.
Otherwise known as cash advances or cash advance loans, they are becoming increasingly popular in the UK as a result of higher living expenses, low wages, and growing levels of debt.
Payday Loans for Emergency Cash
Unlike bank loans, a payday loan should only be used for short term cash problems. Most payday loans will need to be paid off by your next payday. However there are a few Companies that will allow you to ‘roll over’ your loan for another 30 days or so. The important thing is to understand that a payday loan should only be used for this purpose!
No Credit Check Payday Loans
Yes, you can apply for a payday loan even if you have a poor credit history. Most payday loan providers don’t carry out a credit check on you as they are only interested in your ability to repay the loan on your next payday. For most people, a payday loan is a guaranteed way of securing a loan, albeit for amounts up to around £1500.
One of the other main benefits of a payday loan is the ease of which they can be obtained. There’s no requirement to send documents through the post or fax. Almost all applications are processed online in a matter of minutes.
Instant Approval Loans
Payday loans are by far the quickest method to obtain quick cash. Most Companies will process your application online and give you a decision within a few minutes. Once the loan has been approved, money is transferred into your nominated bank account usually on the same day.
The Cost of a Payday Loan
Payday loan providers charge a fixed fee per £100 borrowed. This can range from £20 to £30 dependent on the payday loan Company. Typically, a £500 loan will cost you £125 provided you repay by your next payday. Rolling over the loan will cost you more, so you need to make sure that you can repay the loan when you receive your next pay slip.
Don’t get too concerned with the APR rates charged!
Let’s face it; the need for a payday loan arises out of necessity. If you need cash to cover your living expenses for a short period of time then a payday loan is probably the best way to do it. There are other options, such as Log Book Loans; however these should only be used as a last resort. The secret to using a payday loan is to make sure that you repay it non time. APR rates of over a 1000% are not uncommon, however it is unfair to make a comparison between a payday loan APR and your high street bank.
Firstly, your high street bank advertises APR rates that many of us are unable to get. The rate is also calculated over a long period of time, which reduces the APR rate significantly. APR stands for annual percentage rate and should only be used to compare conventional loans of 12 months and more.
Payday loan products serve a completely different purpose to hire purchase loans and should be used only as a stop gap between paydays. Provided that you repay on time it is not unreasonable to pay £125 for £500 payday loan. Go over your overdraft with your bank and you likely to get hit with a £30 to £50 overdraft charge as well as an extortionate interest rate whilst your account is in the red!