How Do Payday Loans Work?
If you’ve read any of the other posts on this website by now the reason you may want to consider a payday loan is probably pretty obvious, however, let’s take a quick look at why they could prove useful.
Whether you are having car problems, facing an unexpected bill or some other expense – a payday loan could potentially get you out of a fix.
I suppose the nice thing about a payday loan, as oppose to any other form of short-term loan, such as a credit card balance, is the fact that it can be made available to almost everyone – poor or good credit scores.
In fact a payday loan can be made available almost instantly (well at least within 24 hours really).
Applying For A Payday Loan
It’s really easy and quick to apply for a payday loan – far easier than a standard unsecured loan as the lenders don’t need to have quite as much information.
In the case of most payday lenders it tends to be a page of information you need to fill in. The payday loan company can then tell you within seconds whether or not you’re approved.
As long as you’ve been approved the company will simply ask you to enter your bank account details (so the loan can be paid in) and your debit card details (so you can repay the company).
The agreement then appears on the screen and you simply need to agree it – once agreed the money could be in your account the same working day. Pretty impressive if you think about it – it far outstrips the speed of an unsecured loan.
But are payday loans right for you?
It’s down to you really – if you have access to a credit card with a decent credit balance then you probably don’t need a payday loan. However, there may be instances where you may prefer to turn to a payday loan over a credit card, including:
- Emergency childcare
- Unexpected Bills
- Paying for your MOT
- Car repairs
- and more…
How much money are you able to borrow?
Most payday loan firms will offer between £80 – £750 (£1,000 in some cases), however, don’t be fooled. Whilst you may be able to eventually borrow the larger amounts most payday loan firms will only lend what you can afford to repay. For example, you may be able to borrow £120 the first time around and then take out a larger amount once you’ve repaid the balance on this loan… but even then it still depends on your personal circumstances.
What if you can’t repay your payday loan?
This is something worth thinking about. Payday loans can mount up over time if you don’t pay them off quickly. However, most payday lenders will offer something known as a loan deferral. This simply means that you can defer the loan repayment for another month… however it does incur interest. This is why it’s absolutely essential to try and repay the payday loan as quickly as possible. The last thing you want is to descend into debt if you can avoid it.