You know what’s worse than a bad day? It is not having money in your pocket and an unexpected misfortune happens. Many scenarios with an unforeseen expense can force you to look for an immediate cash loans to give you the money you need.
You may seek help from your family or friends or you may use credit card, but if you don’t have these options, you can consider a payday loan. You can find a number of payday loan lenders in the UK, so it wouldn’t be a problem getting one.
Payday loans explained
I guess you all have heard about payday loans. They’re typically small and short-term in nature, and usually settled by the subsequent paycheck of the borrower. However, some lenders have more flexible loan terms with longer payback periods such as three to six months.
Payday loans are also associated with terms like cash advance, quick cash, instant loans, and check advance loans, and much more. Payday loans are becoming increasingly popular because they’re easy money and quick to process.
Payday loans are targeted specifically for people with low credit scores, who need immediate cash. People looking for payday loans are usually those who would likely struggle in getting a loan this fast from banks and other traditional lenders because of their current financial status.
Payday loans are known for their extremely high interest rates. However, this is understandable because of the high risk involved since these loans are unsecured. The high interest rates also compensates the lender for a quick and hassle-free loan that caters to those with poor or bad credit.
Nonetheless, payday loans are quite helpful in times of emergency or unexpected expenses, especially when you’ve got no savings and nowhere else to go. If you take out a payday loan, you’ll be able to improve your credit record, as long as you keep up with the monthly repayments.
The terms and methods of repayment of a payday loan depend upon the lender. Your lender may ask you to write a post-dated check or leave your ATM card and they hold onto it. Then, they would have it in cash on the agreed repayment date, which is usually your subsequent payday. Some lenders allow installment repayment for several weeks until the whole amount, which includes necessary fees are paid up.
Payday Loans in the UK
Although the concept of payday loans originated in the US, these loans have been growing quickly in the United Kingdom market over the recent years. The number of UK residents taking out payday loans are increasing four-folds each year.
Payday loans are small amounts of borrowings usually as low as £100, and up to £1,000 for a short term. You can repay a payday loan in two weeks or until your payday. There are also lenders who offer payday loans more than £1,000.
A typical payday loan in the UK would cost you as much as £25 each month for every £100 borrowed. This means, a £300 loan would cost £375 to repay after a month. Majority of lenders charge 25% for an advance repayable at the end of the month. Some lenders charge 30%, which is equivalent to an APR of over 2,000%. Lenders also charge late and miss payment fees. If you fail to repay a payday loan, it will surely lead you to a horrific financial disaster.
Criticisms of Payday Loans
Despite the advantages of payday loans, many are terrified of getting one because of its ridiculously high interest rates that can lead to a horrible debt cycle. This is true to the fact that many UK residents have suffered financially even more because of payday loans.
These borrowers most likely cannot keep up with the loan repayments and their monthly expenses anymore. They are left with no choice, but to apply for another loan. What’s even worse if that, when the borrower fails to make repayment on time, late fee is charged on top of the loan cost, which will eventually build up until the borrower could not handle the repayments any longer.
When income is low, borrowers may have a struggle balancing their monthly expenditures and their loan repayments. There’s a huge tendency that when paycheck arrives, repayment will be made. However, what’s left of the paycheck is not enough. People would end up borrowing over and over. This is what they call the debt cycle.
While payday loans serve us well during times of financial difficulties, it is always emphasized that payday loans are suitable for small, short-term or emergency expenses only. They are only a temporary solution for immediate money problems. So, never make it a remedy for a long-term expense.
Searching for the right lender can be challenging. It’s easy to get confused and lost with so many lenders in the market to choose from. What you need to do is take your time to shop around, check out comparison sites, read customer reviews, and compare the interest rates and charges of different lenders.
Payday loans can be quite risky if you don’t use it responsibly. It is imperative that you pay your monthly repayment on time as well. Have self-discipline, stick to your budget and minimize spending until you settle your debt and get a grip with your finances. Otherwise, you’ll be in a much deeper financial disaster.
Nonetheless, taking out a payday loan is not that bad. In fact, you should be glad there’s such thing as payday loans to save you from financial despair at a moment of need. It is easy and quick to process. You don’t need to wait for days or weeks to get the funds you need. Most payday loans can be processed within 24 hours.
Credit rating is not also a concern when it comes to payday loans. What’s important to the lenders is that you have a stable income. Getting a loan approved with a poor or bad credit is already good enough. Use it wisely to improve your credit record, so you won’t have a problem taking out loans in the future.