Payday loan companies are everywhere. Apart from several major lenders, it is estimated that there are more than 500 companies offering this quick fix loan solution. Some of them operate out of high street shops while others are based online. But what is a payday loan and how do you choose among payday loan companies to find the best deal.
Payday loans are short term unsecured loans. They are called that because the lenders expect borrowers to pay back the sum borrowed by the next payday. This means repayments on the loans are due in two weeks or a month, depending on the borrower’s pay cycle.
Lenders charge either a fixed fee or a percentage of the amount borrowed for awarding the loan. This can work out to a high annual percentage rate (APR) compared to a regular loan, a secured loan or a credit card. Some people estimate that payday loans have an APR of up to 10 times that of credit cards. However, this may not matter if you can pay the money hack on time.
Unlike other loans, it is easy to get a payday loan. You just need to be over 18, a UK resident and have been employed for a couple of months. Apart from some identification, all you will need to show is a record of the salary paid into your bank account over two or three months. The salary amount will affect the amount you are able to borrow. This can be anywhere from £50 to £800 depending on earnings.
Once you meet the basic criteria, you can get a loan easily, as there is no credit check. This may thus be a suitable option for people with a poor credit rating who need short term credit. The loan amount is credited to your bank account within a day of application. Once you have been approved for this kind of credit, it is easy to take out future payday loans without further approval.
To get a payday loan, you have to agree to pay it back when you get paid. This is done by signing a direct debit or writing a post dated check for the loan amount and the fee that needs to be paid. The payday loan must be paid off before another payday loan can be taken out.
If you are unable to repay the money on time, you may be able to extend the repayment period. This will incur another fee, increasing the amount that has to be repaid. And defaulting on the payday loan means that lenders will resort to collections agencies. This could seriously damage your credit rating.
With so many companies involved in payday loans, it can be hard to decide on a good one. Factors to consider are the fees and APR on the loan, the repayment period offered, the time the company has been in business and whether there have been any complaints at the Office of Fair Trading.
Payday loans should not be seen as a long term plan for money management. If you find that you continuously need payday loans, it’s time to assess your finances and consider other, lower interest loan options.
Payday loans are fast taking over from the more conventional cheque cashing outlets where a customer needs to visit a cheque cashing store and physic ally hand over a cheque.
Payday loan companies are easily accessible and their application processes are straight forward and only take minutes. Granted, the APR is higher than most other opportunities but because of the ease of access and anonymity, no need to call in to a high street store and the fact that the loan itself is short term most people find them an attractive substitute to other avenues.
As long as the payday loan is used correctly by paying it back on time and not rolling the loan over until the next payday they can be quite useful for those unexpected bills.
Here’s a list of payday loan companies I found, it also includes some other useful information too.
Payday loan companies are increasingly looking at ways to up their customer base, I myself have found myself in the unfortunate position of having to use payday loan companies services, although I hated using the service I found that the payday loan companies I contacted to be very helpful (which I guess you would!).
I took out a loan because I found myself short after a rather large and unexpected bill for a car repair and was grateful that the loan companies were actually there to help in my time of need. Granted the rates are usually higher than those of other types of loan however if the length of the term is taken into account payday loans are no more expensive than cheque cashing or pawnbroking.
I found in my experience that if payday loans are used in the correct way, i.e. paying them back when due, they can be a useful tool to add to anyone arsenal when trying to beat the credit crunch.
I appreciate that unsolicited calls to your door for credit can be really annoying but for those people who don’t have any other choice and as long as the payday loan is used in the correct way and for the correct purpose payday loans could be the answer.