You’re having financial difficulties and you are attempting to find a source of money to get you through this troublesome period. You’ve exhausted every option possible (extending your bank account overdraft, maxed out your credit cards etc) so now you’re thinking about taking out a payday loan to help your financial situation.
How Do Payday Loans Work
Payday loans originated from the US several years ago but made their way across the Atlantic into Britain in the last few years. The majority of payday loans are borrowed to cover unexpected but urgent issues like bills or rent. The loans can be taken out for a maximum of £1000 in most cases, as they are only a short-term loan. Most instant payday loans will be taken out and repaid within a few weeks as their main purpose is to provide economic relief until the borrower receives their monthly wage. Some payday loans however are more flexible and the debtor can actually choose the repayment period rather than the traditional return once paid model. Some instant payday loans can include a can be borrowed for a longer period, often anything up to three months.
To qualify for a payday loan, you must meet some general criteria:
- Be aged 18 or over
- Be employed part or full-time
- Hold a debit card for a bank account (the same account your wages are paid into)
- Be a UK citizen
- Be registered to the electoral role at your current address
- Have a cheque book (for a post-dated cheque if you use a high street lender)
When you are applying for an instant payday loan you will have to provide detailed information about yourself and your financial situation i.e. bank details, employment details, income etc. Once you have filled out the application form you will be contacted by the lender with their decision usually within 24 hours (some can approve your application in minutes!). Once the decision is made, the payday loan provider will give you instructions of what happens next; agreeing the repayment date and method, discussing the disclaimer/terms and conditions etc. Most online payday loan providers will take your debit card details as this will be how the loan is repaid. After that, the loan will be paid into your designated account often in less than 24 hours of the approval confirmation. Finally, the loan (plus the accumulated interest) is then taken out of your bank account on date agreed upon.
Whether you’ve take out an online payday loan or an instant payday loan from high street lenders, are regulated. All lenders need a Consumer Credit Licence (CCL) from the Office of Fair Trading (OFT) to be able to provide these short-term loans.
Payday Loan Popularity
In 2010, OFT conducted a review of this borrowing scheme and discovered that £900m was borrowed in payday loans during 2008 and it was believed that the value of these loans was growing rapidly.
The OFT found that the stereotypical borrower of online payday loans was more likely to be “a young male, earning more than £1000 monthly, and in rented accommodation. Many are unmarried with no children”.
In the OFT’s study, it was concluded that instant payday loans provided a useful service for those who would not otherwise be able to borrow money legitimately and who then may be forced to borrow from illegal loan sharks.
How Many Instant Payday Loans Lenders Are There?
Instant payday loans are becoming increasingly more common which is no wonder in the current economical climate. It is estimated that there are around 2000 high street payday loan lenders and over 100 online payday loans retailers.
Weighing Up Online Payday Loans
Instant payday loans really can help you out of a financial quandary and provide instant relief to cover your immediate debts. A payday loan is most beneficial and cost-effective when you borrow for only a couple of weeks until you are paid- this is because the interest accumulated won’t be too high and you will be out of the financial contract in a matter of weeks, ensuring a pleasant borrowing experience.
Like entering any contract or financial agreement, be extremely careful and meticulous when you are reading through the terms and conditions of these loans. Make sure there are no hidden clauses and that the charges in the contract match what you read on the website or discussed in the high street outlet.
Advice about Payday Loans
If you are a first time payday loan borrower you should only take out one to begin with to ensure that you are able to repay the loan (and its interest) as if you borrow two online payday loans and find you are unable to pay off them you will find yourself in more debt that you began with. Should you find yourself encountering any problems during your loan period, you should contact your payday loan provider as they may be able to help. It is often thought that lenders of payday loans are inflexible but this is not the always case so contact them as soon as you find yourself in trouble- the sooner the better to allow them the maximum time to try and help you.
Seeking consumer advice about instant payday loan schemes can be useful as you will often get honest accounts of a person in a similar situation to you. But be wary of these kinds of forums as generally people who have had a very negative experience will be the ones who tend to voice their opinion more often and in more detail. People who have enjoyed a quick, easy and effective high street instant payday loan or online payday loan can often be reluctant to mention that they were in debt.
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