Loans: A Look at Payday Loans
Although we all try to be financially prepared for what the future may hold, it is an unfortunate fact that there can be times when even the best-laid plans go awry. Some examples can be an unexpected bankruptcy, continuously late mortgage payments or a vehicle that is suddenly repossessed. In many of these cases, the victims themselves suffer from poor credit. So, they are unable to take out traditional loans in order to make fiscal ends meet. Ironically enough, it can be the timely repayment of these very same loans that will lead to improved credit scores in the future. If you find yourself in this position, what are your options? One popular alternative is known as a payday loan. These short-term loans could very well be a dream come true and yet, there are still some important factors to keep in mind before making your final decision. Let's look at these loans in greater detail.
Payday Loans Defined
Payday loans are financial instruments which can help you to pay off any sudden bills. Unlike traditional loans, your credit is normally not taken into account. All that you will require is some forms of collateral. The majority of providers ask for information such as:
- Proof that you are currently employed
- A valid form of identification
- A current bank account
Approval times are generally less than 24 hours and in the majority of cases, you will be able to access between a few hundred and a few thousand pounds. Much like a long-term loan, these short-term variants must be repaid in a certain amount of time. This window will vary from lender to lender but generally speaking you have no longer than a few months to settle any outstanding balance.
The Benefits of Payday Loans
As you have have already guessed, these loans are a great way to access much-needed capital within a rapid time frame. So, you could be able to cover any outstanding debts without further damaging your credit. Very few customers are denied and after a simple approval process, the money is yours.
The Potential Drawbacks of Payday Loans
These instruments should still be chosen carefully. First, the associated interest rates can be very high. These may prove to hinder your repayments; particularly if you are already on a limited budget. Terms and conditions tend to be quite strict and should you miss even a single payment, the penalties could be severe. If you fail to pay back a payday loan, your credit will be hurt even further and naturally, it will be nearly impossible to get approved in the future.
What to Look for in a Payday Loan Firm
First, the company in question MUST be an active member of the Financial Conduct Authority (FCA). They need to make all of their terms and conditions very clear from the outset. Also, use a loan calculator to determine how much the combined interest and payments will be; you could otherwise get in over your “financial” head. Search for positive reviews from previous customers.
The Top Payday Loan Firms
Some of the top providers which offer these short-term loans are:
- Lending Stream
SunnyNow provides loans of between £100 and £950 pounds. Their interest rate (APR) is currently 573%.
Lending stream offers short-term loans between £50 and £600 pounds. Terms of six months are common and their interest is approximately 661.8%.
QuickQuid provides loans of up to £1,000 pounds and repayment times vary between 28 days and 3 months. Their APR is currently 1,294%.