Payday Loan Guide
What are Payday Loans?
What’s the Procedure?
What do I need to get a Payday loan?
What is the Difference between a Payday loan and a normal loan?
| What are Payday Loans? | Top |
Payday loans are secured short-term loans that allow you to borrow between 80.00 GBP to 750.00 GBP. Payday loans are designed to cover an individual’s cash flow problem between paydays. In most cases, payday loans are usually used to cover additional expenses that crop up unexpectedly. The car breaks down, I have seen a bargain, I need a quick injection of cash. Payday loans are generally only granted to people who work full time and earn at least 750.00 GBP per month.
| What is the procedure? |
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As the name suggests, payday loans are short-term loans that are secured against your next salary, usually the loan matures thirty days after you borrow the money, thirty days being the average amount of time between paydays. When the payday loan matures, you pay back the capital sum you borrowed plus interest to the payday loan lender, you usually have to have a debit card linked to your account, so that the lender can debit your account to get their money plus interest back.
Take this situation for example, let’s say your car breaks down and you need to fix it in a hurry, but haven’t got the cash, and your credit card is on the limit, so in this case a payday loan may be the answer. Once you are approved by the payday loan lender, (a procedure that takes minutes rather than days), the money you need is then deposited into your account, usually within twenty-four hours, and is secured by your next salary. You withdraw the money from your account and pay for the car’s repairs, and on your next payday, the payday loan lender debits your account with the amount you borrowed, plus the accrued interest, which can be between 15%-25% depending on the payday loan lender.
| Wat do I Need to get it? |
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First thing you need is a “payday” from a full time job, and earning over 750.00 GBP per month. You must also have a UK bank account and an associated debit card. Bear in mind, a payday loan is designed for short-term borrowing, and as such, most payday loan lenders do not allow repeat borrowing.
| What is the difference? |
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One of the main plus points of a payday loan is the amount of time it takes to process the application. In the case of a “normal” secured or unsecured loan it takes weeks, even months before approval is granted and you get your money. Compare this to a payday loan where it literary takes only hours to approve and not much longer to receive the money. Another plus point is that the procedure is easy and private. Of course, all these benefits come at a price of higher interest rates than for conventional loans.
A payday loan charges a higher Annual Percentage Rate (APR) than a loan that is taken out over a longer period of time. Payday loan lenders have to by law quote their APRs, some of which can be over 1500%. However, as the majority of borrowers only take out a payday loan for one month at a time, they are never charged the annualized rate. As I have already stated a little earlier, payday loans are designed for the short-term and not for longer terms. Even if the payday loan lender allowed you to borrow for a longer period of time, it is not in your interest to do so as there are far more cost effective ways to borrow money for the medium and long term.
