Are you in a financial crisis? Perhaps this could be one of the reasons that you have come here. While you may be looking for several alternatives to get financial help, you should realize that payday loans can be of help to you. These loans are a form of a short-term contract between a lending institution and a borrower on the basis of annual percentage rate (APR).
It is provided to those borrowers who are in urgent need of cash and require money within a short-time period. But you need to ensure that you do not roll-over amounts or else, you will end up paying a high interest rate.
Normally, these loans have different names which vary from country to country, such as deferred deposit, cash advance, credit access business, deferred presentment etc. The generally acceptable term used for these loans in United Kingdom is payday loans.
Additionally, payday lending has been one of the most controversial types of loans. It has also been banned from being displayed on Google advertisements. However, it still it is on the rife and many people are taking advantage of it, especially those who do not have any misconceptions about it.
How Do Payday Loans Provide a Handy Short-Term Solution?
You may be really good at managing finances, but you need to know that money can fall short at any time. Sometimes, unexpected expenditures can result in a huge chunk being taken out of your monthly budget. It can be due to some medical issue, purchasing a luxury car, buying a house, investing in a business or anything that is important. You would require money for all of these expenses as this can be beyond your financial means.
This is where payday loans become an essential part of your life. These are short-term loans that are especially designed to cover you until the next payday. Helping you during your financial crisis and providing you funds whenever you need, a payback loan can be your life saver.
A number of UK firms specialize in offering these types of payday loans to help out borrowers who require urgent cash as well as those who have a bad credit history. However, one should keep in mind that these loans have high interest rates. Nowadays, the payday loan industry in the United Kingdom has grown rapidly and Wonga is one of the largest lenders in the country, having up to a 40% market share.
How Do Payday Loans Work?
There are certain factors on the basis of which you are provided payday loans. You first need to go to the payday lender and look at their interest and fee structure. You will also get to know certain requirements of the potential lending institutions which will also assess you based on important aspects before granting you a loan. Two most important things that they are going to evaluate you on is your account and income information.
After your assessment, when they agree to provide you a payday loan, you will be asked to sign the check for electronic money withdrawal from your bank account. After that, you will be provided the loan which has a term of 2 weeks to one month. You need to re-pay the loan amount immediately after the next payday. While this is just the manual payday loan method, nowadays, online payday loan methods are on the rife. All you need to do is compare the interest rates online and opt for the one you find to be appropriate for you.
How Much Are You Permitted to Borrow?
This is one of the main thoughts that may come to your mind when you apply for a payday loan. Your borrowings depend on several factors on the basis of which you would be able to borrow anywhere between £50 to £2500. If you require funds for emergency reasons, you can apply for more funds as well.
But for that, you have to be ready as the lender would check a number of factors to determine whether or not you are financially stable and can repay the loan on time. They would evaluate you on the basis of three main factors listed below.
They will see your income and expenses to get a good idea about how much is your affordability factor before lending you an amount.
Credit History or Score
Another main element that the lending institutions would see is your credit history, or your credit score. The lenders would run standard credit checks; for instance, Equifax and Experian checks to see if you have paid any other form of credit in the past and if it was paid on time. If you also want to check your credit score before applying, check it here.
The lenders also see if you have borrowed money from them in the past and whether you re-paid them timely or not.
How Can You Evaluate the Lender?
Just like lenders evaluate the borrowers, you also need to assess the lending institution. There are certain factors on the basis of which you can evaluate the lenders. Take the following factors into consideration to decide which lender is right for you.
FCA Authorized Broker
This sector is really risky and due to its benefits, it can attract some dishonest lending operators as well. This is why borrowers need to ensure whether or not they are dealing with a credible lending institution. Lenders who are registered with the Financial Conduct Authority (FCA) are credible and respectable ones. Also, the firms which provide full transparency to all terms, rules and conditions should be chosen by you.
Interest and Fees
Another main aspect which you need to see is the fees and interest rate on the loan. You need to compare it with that of other lending institutions and opt for the one which you find appropriate.
Terms and Conditions
A credible FCA-authorized broker would ensure that everything is clear and vivid. All the terms and conditions should be read and you should find the one that satisfies your requirements.
Is It Really Beneficial?
Payday loans are one of the best options and are really beneficial from the following perspectives.
- You can get money quickly and very conveniently whenever you need funds.
- The way of applying is really very easy and requires fewer complexities.
- You do not have to wait for the funds; you will get them quickly and as soon as you ask for it.
- You have flexibility in terms of the amount of money you can borrow.
Now that you know the answers to some of the common questions regarding payday loans, we hope you found this article helpful. Compare the interest rates of FCA-authorized brokers here and get access to funds today!