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How To Choose A Payday Loan Company

Payday loan companies are everywhere. Apart from several major lenders, it is estimated that there are more than 500 companies offering this quick fix loan solution. Some of them operate out of high street shops while others are based online. But what is a payday loan and how do you choose among payday loan companies to find the best deal.

What Are Payday Loans?

Payday loans are short term unsecured loans. They are called that because the lenders expect borrowers to pay back the sum borrowed by the next payday. This means repayments on the loans are due in two weeks or a month, depending on the borrower's pay cycle.

Lenders charge either a fixed fee or a percentage of the amount borrowed for awarding the loan. This can work out to a high annual percentage rate (APR) compared to a regular loan, a secured loan or a credit card. Some people estimate that payday loans have an APR of up to 10 times that of credit cards. However, this may not matter if you can pay the money hack on time.

How Do I Get A Payday Loan?

Unlike other loans, it is easy to get a payday loan. You just need to be over 18, a UK resident and have been employed for a couple of months. Apart from some identification, all you will need to show is a record of the salary paid into your bank account over two or three months. The salary amount will affect the amount you are able to borrow. This can be anywhere from £50 to £800 depending on earnings.

Once you meet the basic criteria, you can get a loan easily, as there is no hard credit check. This may thus be a suitable option for people with a poor credit rating who need short term credit. The loan amount is credited to your bank account within a day of application. Once you have been approved for this kind of credit, it is easy to take out future payday loans without further approval.

Paying Back A Payday Loan

To get a payday loan, you have to agree to pay it back when you get paid. This is done by signing a direct debit or writing a post dated check for the loan amount and the fee that needs to be paid. The payday loan must be paid off before another payday loan can be taken out.

If you are unable to repay the money on time, you may be able to extend the repayment period. This will incur another fee, increasing the amount that has to be repaid. And defaulting on the payday loan means that lenders will resort to collections agencies. This could seriously damage your credit rating.

Choosing A Payday Loan Company

With so many companies involved in payday loans, it can be hard to decide on a good one. Factors to consider are the fees and APR on the loan, the repayment period offered, the time the company has been in business and whether there have been any complaints at the Office of Fair Trading.

Payday loans should not be seen as a long term plan for money management. If you find that you continuously need payday loans, it's time to assess your finances and consider other, lower interest loan options.

More articles:

  • The Inside Track On Payday Loans
    Not everyone needs a full fledged loan. Some people just need a bit of cash to tide them over till the next pay cheque. And there's now a way for them to get it. It's called a payday loan.
  • Getting The Best From A Payday Loan
    Many people are choosing a payday loan as a way of dealing with unexpected expenses. This can be an easy way of getting cash quickly. A payday loan effectively gives borrowers a cash advance against the money they expect to earn in the next pay period.

 

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