How Payday Loans Work
The payday loan industry has been booming in recent years. In fact, surveys showed that more and more low income to middle class employees rely on such types of unsecured short-term loans to get through a rough financial spot. In 2009 alone, around 1.2 million people in UK resorted to payday loans for desperate financial times. This no surprise given the convenience and ideal solution the loan provides.
But before you join the bandwagon of payday loan borrowers, make sure you understand how the loan works to get the most out of it.
What is a Payday Loan?
First, let's define what a payday loan is. Like other personal loans such as logbook loans and guarantor loans, a payday loan is one that you borrow not from a bank but from independent lenders. As the name suggests, it is a loan that will help you get through until the next payday.
How Much Can You Borrow?
Loan amounts generally vary from £100 to £1000 payable in 1 day up to 30 days. Compared with other types of secured and unsecured loans, it is smaller because the terms are also shorter. The principle behind it is allowing customers to borrow money for short term until the next payday when you are able to pay for said amount including interests.
What is the Cost of a Payday Loan?
In terms of interest, the average representative AR is somewhere from 1,000% to 2,000% or even more. At first glance, the interest looks incredibly high but you need to remember that APR stands for Annual Percentage Rate and payday loans do not come due in months but in 15 or 30 days. To compare UK's leading lenders' APR, you can check out http://paydayloans.money.co.uk/ for more information.
Who is it for?
Payday loans are for people who need cash fast. It is a short term quick financing you can avail of even if you have bad credit history or rating. If you don't have a guarantor for guarantor loans or car collateral for logbook loans, payday loans seem to be the best option for you. As long as you can prove employment and a steady source of income, lenders will be more than happy to lend you the exact amount you need.
Typically, payday loans attract those who are in the low to middle income bracket because of its quick fix promise. It involves minimum hassles as there's no need to meet a long list of requirements.
Why Apply for a Payday Loan?
There are various reasons why people apply for a payday loan. At the top of the list is for any kind of emergencies like medical, bills long overdue, car repair and similar circumstances. Either way, the loan is one of the fastest to avail in the market today.
Easy access is probably one of the reasons why you should apply for a payday loan given of course that you are going to use the money reasonably. It is also the next best alternative for those who don't have emergency funds.
Where to Apply for a Payday Loan?
Payday loan lenders are available on the high street but now mostly online. All you have to do is look for a reliable company with a strong record and sufficient feed from previous customers. Once you found the right lender for your needs, you can apply online, wait to get approved and receive your cash within the same day.
What are the Requirements?
What are the Requirements?
Payday loans are such a hit among borrowers because of its minimal requirements. In order to get approved, all you need is to meet the following typical criteria:
- You should be a resident in UK
- You should be 18 years of age or above
- You should be in current employment earning a minimum of £750 per month.
If you meet the aforementioned criteria, you should be able to get a payday loan within the day. Just remember, for the loan to work for your situation and advantage, be a reasonable borrower always ensuring to pay your dues on time to avoid the consequence of an ever increasing high interest rate.