Since I can remember I have always had one eye on payday and the other on the bills. The peaks and troughs of income and outgoings never seems to stabilise in today’s unpredictable times. Even the best of us can get caught out be unpredictable expenses such as blocked drains, faulty boilers, car trouble and the list goes on. In these circumstances you might need a little extra help to get you through to payday when the reserves are depleted.
This is the kind of scenario that same day loans fit neatly into. Also known as a ‘short term loan’ or ‘cash advance’ the payday loan does exactly what it says on the tin, it gives you fast access to cash when you need it most and you repay the total amount including interest and charges on your next payday.
The amount you can borrow is usually between £75 and £1000 and is borrowed up to a maximum of 31 days. Some providers will allow you to roll over your loan for up to 4 months if your circumstances dictate. However, rolling over a payday loan can turn out to be expensive, so use this facility as a last resort.
How much do they charge?
Payday loans are by and large very straightforward, there are usually no administration fees and no hidden costs. Keep your eyes peeled as there is always the odd rogue company out there but most companies are clear about their charges being so many pounds for every £100 borrowed with no other charges involved.
Most Internet loan lenders will charge somewhere between £25 and £30 for every £100 borrowed. If you roll over your loan for an extra month there will be additional charges involved.
Who would use a payday loan?
To be eligible for a cash loan you need to have a regular income and a bank account that accepts direct debits. the usual online companies also insist on you having a valid debit card attached to your bank account.
Here are a few of the circumstances where a payday loan may be the right choice:
You want to avoid bank charges/defaults – Most high street banks and building societies charge high penalties for bounced direct debits or bounced cheques. A payday loan can save you money in these circumstances and help you avoid defaults being reflected on your credit file.
If you are a tenant – Almost all loan companies will accept your application if you’re a tenant or a home-owner.
If you have a bad credit history – Payday loan companies do not usually use credit scoring to assess individual applications. If you have a regular income and can pay the debt on your next payday you will be eligible.
Out of the blue expenses – None of us are clairvoyants, when the unexpected happens and payday is too far away a payday loan might be just the solution you need.
You just need cash now – a holiday bargain or a deal that is just to good to miss are good reasons to consider a payday loan. The best companies can funds in your account the same day if you apply early enough.
The pros and cons of payday loans
Pros – solves short term financial needs
Payday loans are elegant solutions to short term financial needs. You can get yourself sorted without calling on friends or family without taking on a long term debt. Payday loans DO NOT affect your credit rating and you will not be asked any awkward questions about your personal circumstances.
Cons – should be avoided for long term lending
Payday loans will have comparatively high rates of interest when compared with regular loans over periods such as 12months or more. Whilst a payday loan will likely save you money over the short term, if you roll them over more than say 3 months they will not be cost effective.
How do I get a loan?
You will definitely need a bank account and a regular wage but some companies will request some or all of the following:
• Copies of your debit card front and back
• Proof of your current address (utility bill or bank statement)
• Your pay slip (up to 3 months worth)
• Bank statements (up to 3 months worth)
If you apply for a payday loan you can usually attach any requested documents in an email or fax them over to the company.
Some myths surrounding the payday loan industry
The realities of payday lending are vastly different than the myths and propaganda spread by critics. The following is a straightforward and honest examination of payday lending to help separate the facts from fiction.
Myth#1: Payday loans have unreasonably high interest rates.
Truth: A payday advance must be paid back within a relatively short time period, and unlike other financial services, the fee does not compound interest. This product provides a proportionate remedy to meeting working people’s short-term needs. And payday loan customers say they appreciate why a wage advance, with a one-time fee, can be less expensive than taking on the costs, for example, of bouncing a check, missing a credit card payment or neglecting a bill. All this can leave you in hot bother with debtors and creditors – see more about ccj loans.
As required by law, the annual percentage rate (APR) is always disclosed for these products. But because of the short duration of a payday advance, the APR comparison is a misleading one. Payday advances are generally for two-week periods; they’re not annual loans. So the typical fee of £25 per £100 borrowed equals 25 percent. To reach the triple digit APRs quoted by critics, a consumer would have to renew an advance over and over. For example, critics often cite in excess of 1500 percent APR as an average for a payday advance. But the only way to reach this rate is to rollover an advance every two weeks for an entire year-26 times! This is unrealistic considering that most companies do not even allow one roll-over more than twice.
And let’s consider the APR of some so-called alternatives to payday advances:
• £100 bounced check with £54 insufficient funds fee equals 1,409 percent
• £100 credit card balance with a £37 late fee equals 965 percent; and
• £100 utility bill with £46 late/reconnect fee equals 1,203 percent.
Myth #2: Payday loans trap borrowers in a never-ending “cycle of debt.”
Truth: The “cycle of debt” catchphrase is the critics attempt to portray our industry as taking advantage of people. They use annual percentage rate (APR) exaggerations to paint a picture that loan companies greedily profits by forcing their customers into advances that they cannot afford to repay.
But no one benefits in this model and that is why centres and service representatives work with customers to find an advance that matches, but does not exceed, their needs. If a customer is unable to pay back an advance within the arranged time frame, some companies offer an Extended Payment Plan to allow customers a longer time period to repay at no additional charge.
A shirt term loan can be a good and appropriate choice for consumers who seek a measured and responsible tool for managing their cash flow, particularly balanced against the cost of bouncing a check or missing a credit card payment. Indeed, millions of consumers have avoided excessive credit card late fees and interest, high insufficient funds fees and other punitive costs for missed payments.
Myth #3: Lenders prey on unsophisticated customers.
Truth: Customers say they understand the payday transaction and the value of the product compared to other options, and choose an advance because it saves them money. It can be the right option for those who experience unexpected expenses or other sudden financial needs, and have the ability to pay off the debt in a timely manner.
Nearly 90 percent of customers have graduated from college. Ninety-two percent of customers think payday lenders offer a valuable service and 90 percent are satisfied with their understanding of the terms and costs of payday advances. Nearly half of our customers own their home, and our customers’ median household income is £20, 257. These statistics show that payday loan customers are not the uneducated, unsophisticated people who the industry critics seek to portray.
Payday loan customers are overwhelmingly happy with the product, registering very few complaints. More than 95 percent of payday advances are ultimately paid and more than 90 percent are paid when due.
Myth #4: Payday lenders provide money to people who cannot afford to pay it back.
Truth: Critics of payday loan companies seek to perpetuate the idea that the payday advance industry exploits the downtrodden. They have created a misconceived image of the customer base. Actually, customers represent the heart of the UK’s middle class-consider these statistics:
According to a post on Facebook hundreds choose a cash advance as a dignified, discreet, and often less costly solution for cash flow problems, without asking family for money or risking personal items as collateral;
If payment cannot be made within the original contract, an Extended Payment Plan may be arranged, giving customers the option of repaying advances over a longer period of time at no additional charge;
- 70% of customers choose payday cash advance for convenience; only 6% because there was no alternative;
- 92% say payday cash advance is a useful service;
- Average age of a payday cash advance customer is 39;
- 86% have a college diploma or better;
- 45% own their own homes; and
- 100% have a steady income and active checking account, both required for a payday cash advance.
Myth #5: Payday lenders oppose regulations of the industry.
Truth: Most payday loan companies are registered to the Consumer Credit Act, whose mission is to promote laws that provide substantive consumer protections and to encourage responsible industry practices.
The majority of payday loan companies comply with the Truth in Lending law and provide full and upfront disclosure of the terms and costs of an advance. And strongly support programs that raise consumer’s awareness about financial literacy, and efforts to educate them about making sound long-term decisions related to their money.
Eligibility for these cash advances
What is the eligibility criteria?
If you are 18 or over, in full time employment earning £750 per month or more, you are likely to be eligible. You will need a bank account that accepts direct debits and we are required to prove your identity.
Do they use credit scoring or credit reference agencies?
Most do not use credit reference agencies to score your application
I have bad credit history – can I still apply?
Absolutely, decisions to lend to you over the long term (12months or more) therefore we are only interested in your present circumstances.
I don’t have a debit card – can I still apply?
It is not always necessary to have a debit card attached to your bank account, please ask us for more details.
How do I apply?
Complete the quick and easy online form. If you are approved you may be asked a few quick questions by one of our trained operatives and then sign your loan agreement. That’s it, we take care of the rest.
When will I get my funds?
The funds are transferred straight away; if it’s before 3pm then you will have your funds today. If not, then they will be in your account on the very next working day.
How will I get my funds?
It will be paid directly into your bank account.
How do I pay back my payday loan?
Easy as pie, payment via direct debit on your next payday.
Can I defer my Payment?
Yes – although after deferring the payday loan twice you will be asked to start reducing the balance. Deferral will incur new charges for every month the loan is deferred – but still at our fixed rate – there are no additional charges.
What if I have problems paying?
We understand that people’s circumstances can change. If this is the case, you must let us know as soon as possible and we will do our best to help. The most important things to note are:
• Don’t borrow money you don’t think you can pay back
• Talk to the lender