The growth of the payday loan sector
Payday loans bridge the gap between finance from the high street and your friends and family. A payday loan lender is like your friend but in a different capacity to help you out when you need a financial jolt for the end of the month. They are designed to give you cash that can tide you over until you get paid from your job.
How it works
Payday lenders are the source of payday loans. They should only be used when you need cash to pay for your expenses before payday. Lenders are found online and through loan comparison websites. When you find a lender that you like the look of, responsible payday loan lenders will have criteria that you need to hit in order to be approved for a loan.
Checklist of Payday Loans
- Being a resident of the UK
- Being at least 18 years old or over
- Having stable monthly income
- Filling out the application form correctly
- Explaining what the loan is for
When you apply for a payday loan, you should apply for the amount that you think you can repay back on time. Multiple repayments are a new innovation in the payday lending market in order to help consumers manage their payments. The interest rates from payday lenders fluctuate but to cover potential defaulting from customers, the interest rates are higher than borrowing from your bank.
What makes payday lending different is that it is meant to cover the shortfall in your expenses if you have an emergency for example. You can’t go to your bank and borrow £500. With a payday loan lender, you can do this in a short amount of time thanks to instant applications.
Payday loans have come under scrutiny because of thoughts that the industry is not regulated as much. However, there are regulators and associations such as the Credit Services Association (CSA) that are committed to promoting responsible lending. You should look for lenders that are part of these associations so that you know they go by the code of responsible lending.
Payday loans have become popular in recent years because of a few factors. The recession has made it difficult for many Britons to keep up with the cost of bills especially in cities like London. Check out survey results done by Peachy in September 2013. Payday loans are helpful forms of credit that should be used when you understand that they should only be used for the short-term.
How to use payday loans
Payday loans should be used in a certain way. Take a look at the top tips that you should use to make payday loans work for:
- To pay unexpected expenses: From emergencies to council tax bills that just comes up all of a sudden, payday loans can be used to pay for these. You need to consider how much they are before you apply but unexpected costs have to be paid before you can use your disposable income.
- For a short period of time: You should use your payday loans for short periods of time so that you can build your credit and pay off your debts.
- Have a repayment calendar: It’s important to know when you need to make your repayments, especially if you opt for multiple repayments with your lender. You can make your own calendar or put reminders in your mobile phone such as 1 week before the payment is due.
The growth in the payday loan industry in the UK will be regulated to ensure that consumers are protected and that lenders are adhering to responsible practices. These loans can help you when you need financial support the most – just make sure to see if they are right for you.