What is a Payday Loan?
If you have found that you are hit with an unexpected bill that is larger than the money you have saved, or need some short-term financial assistance to help with a repair or vital maintenance issue, and at a time where your next payday is a few weeks away, a payday loan could be the ideal help you need. Here, we have put together a brief guide to explain exactly what a payday loan is and all other bits of relevant information you could need if you are considering taking out a payday loan in the near future.
A payday loan is a loan of a short-term nature. They are designed to help people who are facing financial hardship of an immediate nature, with small unplanned and unexpected expenses the main reason behind a payday loan being required. A payday loan in most cases will range from an amount as small as £50, up to around £1,000.
There are plenty of payday loan providers on the market and they can be quite easy to acquire, no matter your circumstances. Many payday loan providers will accept people who are applying with adverse credit and those who have been turned down from traditional lending sources, such as those who have enquired about a loan from their bank or an extension of a bank overdraft for example.
A payday loan will have a much higher interest rate than other forms of credit that you might have taken out in the past, with APRs advertised into the 1000s per cent in some cases. Do not let this scare you off as a payday loan is meant as a loan that is paid back on your next payday. A representative APR of 1500% for instance, will include all fees and added costs, and be representative of an annual rate. In the vast majority of cases, a payday loan will only be applicable for a few weeks, up to 4 or 5 weeks at most. The time you have in which to pay back a payday loan will depend on the specific lender, with some offering more flexibility than others. Payment is made via direct debit, and a successful applicant will have been thoroughly vetted to ensure that they will not be placed in further financial trouble by taking out a payday loan. Those who are late with a repayment or miss it completely are likely to be hit with interest and charges for the offence. If you are not careful this can add up quite quickly.
There are only a few eligibility criteria for applicants of payday loans. To be successful you have to be over the age of 18, have a bank account and be in some form of employment. Applicants with a low credit score are less likely to succeed than those with good credit scores, but there are payday loan providers that can help those with an adverse credit history. Taking out a payday loan shouldn’t have a negative effect on your credit score, as long as you repay the loan in full and on time. Always do your research before entering into an agreement with a payday loan company.