What is a payday loan: If you’re dealing with an unexpected expense and need money quickly, payday loans might be able to help you out. Whether it’s an emergency or something more mundane like paying bills, payday loans in the UK can be of great assistance when you need cash fast.
To make sure that your payday loan experience goes as smoothly as possible, there are certain things you should know about these products before applying for one. In this guide, we’ll go over what is a payday loan to how you can ensure that you qualify.
Payday loans are short-term, unsecured loans that are typically for small amounts of money; they’re often used by people with poor credit who don’t have other financial options.
The annual percentage rate (APR) on most payday loans ranges from around 100% to 650%, and fees can also be steep—but unlike with many traditional bank loans, these fees are typically deducted directly from your paycheck instead of financed into an ongoing balance, which means they don’t show up on your credit report and can’t increase your debt.
In most cases, you must have a steady source of income and an active checking account in order to qualify for one of these types of small-dollar advances.
What types of loans do they offer?
The best payday loans UK providers in England offer two types of loans: short-term loans and installment plans. Short-term loans are more than likely what people think of when they hear payday loans—which typically last just a few weeks and are repaid by direct debit payments.
These short-term loans allow people to access money for any purpose, whether it be an emergency expense or for something like medical bills or holiday shopping; even something as simple as covering your rent can qualify you for such help.
How does it work in practice?
In general, you’ll fill out an application and be approved for a loan within minutes. You’ll then get a decision on how much you can borrow (usually up to half of your paycheck) and when your first payment will be due (generally two weeks after approval).
The lender will immediately deposit money into your bank account, and most lenders charge fees that range from 2% to 10% of your overall balance. After paying back your initial loan, any interest accrued during that period (often referred to as rollover interest) gets added onto your principal balance for future payments until that debt is paid off in full.
How much interest do they charge, and how many times can I roll over the debt?
The interest rate varies from company to company and depends on your credit history; it can be as high as 50% APR. Unfortunately, all lenders allow rollovers, but each one has its own rules when it comes to how many times you can do so (some will put your application on hold after two or three tries).
If you’re looking for an emergency payment—something that might be possible through another type of loan—paying back an online payday lender who lets you roll over your debt every month isn’t going to fix your situation or help pay off any debts; it’s just going to make matters worse.
Alternative ways to get extra income quickly
Don’t want to sign up for a costly payday loan from one of Britain’s many unregulated lenders or are you simply not eligible for one because of past credit problems? Fortunately, there are other ways of getting an extra paycheck quickly.
Consider taking on additional work (if it doesn’t take away too much time from your main job), borrowing money from friends and family, or using emergency funds until your next paycheck comes through if necessary. Taking out a low-interest personal loan might also be an option if your credit record is good enough. You can learn more about payday loans and other options for quick cash on Monemyst.