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Payday loans are a very common way to obtain a few hundred pounds in the event of an emergency.
A payday loan essentially allows you to get a certain amount of money when you are in need and then pay back said amount, plus interest, once your next salary from work has been paid.
There are even providers that offer payday loans for bad credit scores to apply, which can help those with the odd missed payment here and there.
In this guide, we are going to be looking at the more in-depth benefits of choosing a payday loan as your finance of choice.
Payday Loans may offer a fast way to get money into your bank account. Most lenders aim to transfer you the fund within 1-2 hours of application approval – helping those pay for any pressing emergencies such as broken boilers, car repairs and rent to pay.
The speed at which the loan is approved will, however, be based on whether you have fulfilled all the necessary requirements and provided the correct information. If you have been rejected, you will also be informed of this very quickly, and you can then spend your time looking for another provider to take you on.
The application process is designed to be very simple and very easy. Due to this, applicants can apply online and receive an instant decision and further to some addition credit and affordability checks, they are in a position to receive their funds on the same day.
When compared to other forms, it may take you a few weeks to receive a credit card, which is not ideal for an emergency. Other types of finance such as secured loans or car loans also require more verification and can take several days or weeks to be funded.
Payday offer discretion if you need to borrow money. Of course, you have to use your real name and work directly with a lender, but you can save face and apply for them online. No need to ask your bank manager or a family member, it allows you to take care of a financial expense or consolidate your debts and saving your reputation as well.
The majority of lenders in the payday loans industry are online and the application process is becoming purely digital as the industry moves away from in-house, written application forms. This means that to get the money, you do not even have to leave your house or from the office, or wherever you may be at that moment, providing it has an internet connection. Whereas going about getting a traditional loan often means attending meetings or having to schedule in a call with a loan officer.
It is also rather convenient that you will receive the loan in cash rather than in the form of credit, like you would if you were to apply for a credit card instead. Since it is in cash, you can physically use it for your emergencies and get your life back on track.
For years, the payday loan industry was plagued by high fees, data-selling brokers and aggressive call centres, but a huge clean up by the Financial Conduct Authority has seen a crackdown of the industry.
There are stricter rules to provide and introduce loans which has led to only the more responsible and reputable companies left to trade in the industry. A price cap in the industry has limited charges to ensure that individuals do not repay double what they have borrowed.
So those looking for payday loans, now have peace of mind that they will be working with well-regulated companies, charged reasonable rates and their details will be kept safely.
For those customers who have successfully repaid their loans on time, the lender may be able to offer them a higher amount on their future loans, provided that they are still employed, earning income and their circumstances are not worse off. For some companies, there is typically a maximum amount you can borrow as a first-time borrower such as £300 or £400, but this can increase to £1,000 or £2,000 once you have repaid on time.
This is based on increasing your loyalty score with the lender and them having a better history on you and what you are like as a customer. If you default on the odd repayment, this may jeopardise your chances of borrowing again and at a higher rate.