Are UK payday loans a godsend or a hindrance?
UK payday loans are the perfect solution for someone facing short term monetary needs such as medical emergencies, household bills etc., but who may not have the finances to meet these needs.
Under most circumstances you could either choose to borrow from friend, a relative, or even a bank but if both those avenues are not accessible or even suitable then a UK Payday loan would be the best option to consider. A payday loan is a small short term loan which is used to cover the borrower’s expenses until they next get paid. The amount of cash advanced can range from £100-£1500 depending on the lender.
These loans are normally offered through cash advance businesses. A cash advance lender SimplePayday have offered these loans to UK residents since 2009. James Dickson from the company said that even though these are high interest loans, the convenience and ease of use makes them indispensable to many customers'.
"They provide many benefits which can make a big difference, compared to typical financial institutions they carry little to no paperwork. Making them incredibly quick to apply for."
These benefits include:
- Fast Access - One of the major advantages UK Payday Loans have to offer is their easy access. This is accomplished through easy to do applications and bank transfers. For some institutions, this transfer can be processed on the same day as the application. This can make a big difference especially when faced with emergencies that need to be settled quickly.
- Non reference to Credit History - Lenders will often not refer to your credit history while processing your application. Therefore, if you have a bad credit history you will not have to worry about your application being rejected depending on the payday lender.
- No checks on money usage - While applying for a payday loan you are not required to inform your lender how you intend to use the money borrowed. This is a typical requirement with traditional lenders which can restrict how you use your borrowed money. Therefore, with UK Payday Loans you can maintain some level of anonymity as far as your spending habits are concerned.
- Flexibility - There are different types of UK payday loans which cover different types of borrowers and repayment periods. For some, you are required to make payments as soon as you next get paid whereas for others you settle your payments over a longer period of time. It would be wise to consider your cash flow needs and the amount of flexibility you need in order to make your payments with ease.
- No Upfront Costs - With a payday cash loan you will not have to worry about any upfront costs to process your application. This can be a big advantage in the long term since the charges are easy to understand and you are more likely to contain the cost of borrowing.
- Discreet - Applications for payday loans are discreet and easy to do. Depending on the lender, you can either process it online or over the telephone. All they will require is some verification of employment or income such as a bank statement. This will ensure that your financial matters are kept private and confidential.
Short term loans offer many advantages over standard loans. As long as you are committed to your repayment you should not have any trouble accessing a payday loan.
Managing your responsibility
These one month loans offer a quick and easy way to access credit, which is covered by your pay packet at the end of the month, or whenever you get paid. They have easy application procedures for all types of borrowers, including those with a bad credit rating. But, at the end of the day it is still a loan and as such should not be misconstrued as an extra source of income.
The interest rate you are charged also known as the Annual Percentage Rate (APR), can easily accumulate into unmanageable figures if you do not make your payments on time. It is therefore important to consider how you plan to borrow and manage your loan over its life time.
Therefore several factors, which if carefully considered can contribute greatly to lower costs of credit. These factors include:
- Your Borrowing Needs - Whilst processing your application, it would be wise to borrow an amount of money that meets your needs precisely. This will help to avoid getting into unnecessary debt just because you are approved for it. You could always save your money in the long term and buy those items minus debt.
- Make Your Payments on time - Make sure that your online loan falls to be repaid when you have money in your account (i.e. get paid). If you default on your payments then your lender is likely to raise interest rates or demand that you pay off a portion of the loan amount. This can put you in a financial jam, depending on your cash flow needs. It is therefore important to always make your payments on time. If you cannot do this then always discuss your financial situation with your lender, before they take the necessary steps to manage your account.
- Compare interest rates and charges - There is a huge variety of payday lenders in the market, all of whom offer loans at different rates and charges. Make sure to do research for different payday lenders to get the best available rate and charges. The best payday lenders offer flat interest rates and financing fees. These two figures added together will give the true cost of your loan for the period. Since most payday lenders are accessible over the internet, this should be an easy thing to do.
In order to get the best out of your loan, you should carefully consider the above factors in your application process to find a loan that best suits your needs.
A refreshing change
Most loans can be a pain and time consuming to get as you may know. They usually involve a lot of credit checks, signatures, paperwork and may even require handing over some of the equity in your house.
A refreshing change from the old fashioned long and drawn out application process, getting an online loan takes a matter of minutes.
What does the application process involve?
You have a couple of choices when it comes to applying for this type of loan. You can either go to your local broker (if you have one) or even do it online.
You will need to prove that you have money to repay your loan, and this can be done by showing payslips and/or bank statements if requested by the lender when reviewing your application.
When you apply online the process is easier and you can pay by Debit card when the term is up.
At this point you will either need to return to the lender to pay off the loan or they will simply pay in your post dated cheque.
If you need money on a ‘rolling’ basis, perhaps to help with the day to day cash flow of living, then some lenders operate a system whereby you can pay off your first loan and immediately take out a second one which can be a good solution at difficult times.
Things to consider
A few words of caution, however. It is imperative that you make sure you have enough money in your account when you say you will – bounced cheques incur fees, both from the bank that you hold your account with, and also from the payday lender who also won’t be keen to lend again should you need it in the future.
Another point to consider is that interest rates can be high with this type of loan so if there is any doubt in your mind that you mightn’t have the money on the date you need to pay it back then more thought should be put into whether or not you should apply.
In the vast majority of cases however many people find these loans to be a lifesaver in times of difficulty or unexpected extra expenses. Money problems can crop up with all of us and it’s good to know that there is an option quickly and readily available to ease the burden.