Payday loans are small short term loans which are designed for those with temporary cash flow problems.

Applicants must be over the age of 18, and a permanant resident in the UK, have a regular income where your money is paid in directly to your bank account. The amount you can borrow usually depends on your income but most lenders allow anything from £80 to £750. Most payday loan terms are upto 30 days, usually to be repaid on your next pay day.

Most lender interest rates are around 25% for the loan, For example if you borrowed £100 you would have to repay £125. However, some lenders will charge you more therefore you may want to look shop around for the best deal.

What Are The Benefits Of Payday Loans

One of the main attractions with payday loans is fast approval, usually they can be approved on the same day and the funds can be transfered into your account within 24 hours, although sometimes it can take upto 48 hours for your money to clear.

Payday loans are not like other forms of credit such as credit cards and loans, payday loan lenders do not require any credit checks, which means that even those with a bad credit history can be accepted for payday loans, however they should only be considered as a last resort or if you need money in an emergency.

Many people are attracted to payday loans because of the convenience, no matter what the emergency if you need to get your hands on some money fast payday loans can be transfered into account usually in 24 hours and with very little paperwork to fill in.

What Are The Disadvantages Of Payday Loans

Although payday loans can prove useful in some circumstances, they can lead you into a dangerous trap if you are not careful. Here are a few things to look out for.

Beware Of High Interest Rates

Payday loans are well known for there ridiculous interest rates, the average lender charges around 25% interest for borrowing money for one month, so if you borrowed £100 you would repay £125 on your next payday. If you consider the average credit card charges between 16% and 18% typical APR and the average personal loan is only around the 10%, payday loans can charge a ridiculous 1355%.

Lenders claim that the APR rates are irrelevant because they are only short term loans and are only designed to help temporary cash flow problems.

Rollovers

Most payday loans now offer a rollover service where the lender will allow you push back your repayment date until your next payday, however this does come at an extra expense as you will be required to pay off your first months interest of which you will be charged for again on your next payday plus any additional charges or fees the lender wants to charge for rolling over the debt. This is where lenders can really earn there money and make your debt very expensive.

Because payday loans are only designed for a short term, most borrowers will find it hard to repay there loans each month and are compelled to keep rolling over the debt each month leaving them stuck in a continuous loop and rolling over ther debt on a monthly basis.

What are the alternatives?

Payday loans should be considered as a last resort only, so if your in the need for small temporary loan try these alternatives first.

Apply For An Overdraft

Most banks accounts offer an overdraft facility so you may be able to arrange with your bank. Most overdrafts chage around 18% interest and can be very useful if needed in an emergency.

Credit Cards

Credit cards are another alternative to payday loans the interest rates are much less around 16% APR. There are hundreds of credit cards to choose from any many have some great benefits such 0% interest on new purchases for a set period of time, cashback, and many other great rewards. Even those who need cash can get cash advance's from credit cards and are much cheaper then payday loans.

Borrow Money From Family or Friends

You can always try asking friends or family to borrow you some temporary cash and save paying the ridiculous interest rates charged on payday loans.

An Advance From Your Employer

In some cases employers will allow you cash advance's until payday, so if you get on with your boss you may be able to arrange a temporary cash advance from them.

Our recomendation

If you decide that a payday loan is the right choice for you its important to make sure that you you read through the terms and conditions before you apply. Most payday loans will offer you upto £750, however Sameday Money and Everything Payday both allow you to borrow anything upto £1000 and can have the money in your account the same day. Txt Loan is also a handy loan service where you can get funds put into your account by sending a quick and easy text, you will need to register your details first.

We recommend that you only apply for a payday as a last resort or in an emergency, otherwise you may be better off finding an alternative way to solve your temporary cash problems.

 

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