Think long and hard before considering payday loans

Payday loans may seem like a simple way of solving money related problems in a quick and effective way, but the customer must be well aware of their functionality before signing up for anything. These one hour loans allow nearly anyone to get some quick money in order to pay unexpected expenses or to invest in short term business ventures. However, if someone is looking for a loan that just allows them to pay their bills, a payday loan may not be the proper solution.

piggy bankThe basics

The first requirement to apply for a payday loan is to have a steady job. This may sound quite obvious, but it’s important to understand that a freelancer, for instance, will have a hard time applying for one of these loans.

The second requirement is a solid credit history. Some people are good at paying their bills on time and at living with what they have, never using credit cards or loans for anything; despite how good that may sound, that is not the way of building a good credit history. Customers who usually spend money from their credit cards, and pay the bills on time, are the perfect candidates for payday loans, as their credit history flags them as “reliable.”

What’s available?

These loans offer amounts as small as £100 or as large as £1000, so are perfect for small unexpected expenses, such as dentist bills, car repairs, home improvements or any emergency scenario that may present itself. The interest rate is usually slightly higher than for loans offered by high st. banks, but they are much easier to get hold of on the same day, also if you have any type of county court judgements this is out of the question. For those customers these so-called ccj payday loans can be approved regardless of previous repayment problems with previous loans. This is obviously a dangerous situation for the borrower and the lender.

The lender is obviously at risk from not being repaid and the borrower is quite frankly endangering their risk to possible baliff action. Although you would beg the question of, if the lender is crazy enough to lend the money to the borrower, who has lists of previous defaults and highly likely to default again.

Repayment

When it comes to paying back the loan, the sensible thing to do is to stick to the time frame provided by the loan company; most of them penalise those who pay earlier, and all of them will charge a great penalty fee to those who pay late. When applying for a payday loan, all customers’ should pay attention to the contract and to the interest rates suggested. They are usually expressed in terms of APR, or Annual Percentage Rate. As the exact definition of APR varies depending on the country or the state, it’s important to ask directly to the customer service employees how much money will be required to pay back, and to ask them to give that in the simplest terms possible.

loansWho uses them

The constant uncertainty of life and lack of froward-planning has become the major reason why people rely on loans to pay urgent bills.This is because they are in urgent need of money with no-where else to turn. These customer’s are happy to make the payment from their future earnings the following month.

Is it that simple? Well, finding websites offering these quick loans may be easy. But finding a reputable one can be somewhat challenging. It is important to do your research to ensure you are dealing with a fully-licensed and reputable company. When one spends some time in finding out the potential lender’s background, then this will give you peace of mind over their possible collection procedures and practices.

There are many companies out there with terrible reputations, largely because of shady practices

Make sure that there is a clear explanation from the lender on the interest charged and any other applicable charges. Also you should consider the loan limit and other specific requirements related to the repayment of the cash advance.

Word of warning

Of course everyone has heard horror stories from friends, family and the media about this industry. What is clear is that there is a large part of the population that uses these loans instead of other credit alternatives. The reasons for this remain subjective to those involved, however, what is clear is that the lenders’ do have new and returning customers’, so people do find them helpful.

However, we all know that the interest for these loans is very high. It is for this reason that borrowing money from friends and family would be preferred for many. Although if you do not have this luxury or perhaps you do and are just too embarrassed to ask, then a same day loan could be the only avenue open to you.

Remember do not even consider this option if you have recurring financial problems as this will do nothing but exasperate those already existing problems. For more help on debt or debt advice please contact nationaldebtline.org for free and confidential advice.


2 thoughts on “Think long and hard before considering payday loans”

  • 1
    Daniel on July 15, 2016 Reply

    Very interesting article, not sure it belongs here, but good advice nonetheless

  • 2
    jon on July 22, 2016 Reply

    i don’t like these loans, I think they should be banned

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