You may have seen advertisements for instant payday loans and wondered what they are. They can sound rather good; that you will get the money that you need instantly. Of course, no lender will give money instantly, but these payday loans can be arranged very quickly and so if you need funds really quickly, it can be worth considering them.
Representative Example: £400 borrowed for 90 days. Total amount repayable is £561.92 in 3 monthly instalments of £187.31. Interest charged is £161.92, interest rate 161.9% (variable). Representative 305.9% APR. We are a broker not a lender. We don't charge fees. We don't sell your personal information.
The application process is really fast which is why they can give you the money quickly. The process tends to be as follows:
As long as the applicant is able to provide the details required really quickly, then the whole approval process can take just a few hours. Part of the reason for this is that a credit check is not as strict but it is also because the lenders are well staffed and therefore have someone available to process the information as soon as it arrives. They will do some ID checks themselves as well as checking ID that you send but this does not take long.
The lenders vary in how much money they will have available. The amount is normally between £100 and £1000 although this could be higher or lower. However, they will not necessarily lend everyone the amount that they require, even if they have that amount available. Lenders tend to start by lending a smaller amount and then if the borrower pays it back, they may be happy to lend them more next time. This means that if you need a largish sum of money but have not used them before, you may not get the amount that you want. This may also depend on your income and whether the lender thinks that you will be paid enough to be able to cover the cost of the repayment of the loan.
Once the loan has been approved you are given the money right away. It is usually put straight into your bank account, although if you are using a high street lender then they may give you the cash. The lender will also ask you to agree to a direct debit, which will repay the loan when you get paid. This normally tends to be one lump sum payment which comes out when you are next paid although some lenders may allow payment over several months.
Although these types of loans were set up for those with a bad credit rating, who could not borrow elsewhere, there are no restrictions on who can have a loan like this, as they are so quick to arrange. They are suitable for anyone who needs money quickly and cannot get it elsewhere. There may be cheaper alternatives available for those with a better credit rating but they will not be so quick if they have to be arranged first, so it can depend on how urgently you need the money, as to whether this sort of loan is for you.
Payday loans do get a lot of bad press and this can put people off using them. Sadly, the media only tend to report negative stories and we do not hear about all of the people that have benefitted from loans. There is a risk with all types of borrowing that you may get into debt trouble if you cannot make the repayments. This is the same with all types of loans and it is always worth making sure that you will be able to manage. Payday loans used to charge very high amounts if a repayment was missed, but there are now regulations in the UK to protect borrowers so there is a cap on the amount that can be charged in total. This means that it is less likely that you will get into unmanageable debt.
Deciding whether a payday loan is right for you is very much a personal decision. You need to think about your circumstances and whether you think that you need the money and if you will be able to manage the repayments. They are best used to cover emergencies or sudden bills rather than if you are just not managing each month as you are more likely to be able to manage the repayments in the first instance.