Payday loans: Apply online and borrow up to £1000!
Are you tired of having your loan applications rejected?
Whether you survived the financial crisis or not, the credit card crunch still hits household hard!
And while an economic crisis may be over, there are many families out there who are struggling and trying to make ends meet.
Yes, financial assistance might be available, but this support is either not enough or not offered to people with lower incomes or poor credit scores.
“I have a perfect credit score and have never missed a repayment, but they still rejected my application. Why?”
If this sounds familiar, we get it. Credit is not offered to everyone, even those with good credit scores.
As financial institutions are tightening their lending criteria, there is a simpler, more straightforward alternative.
A payday loan.
What is a payday loan?
A payday loan is a temporary solution to borrow a small amount to aid households in meeting their monthly expenses, between their ‘paydays’ – hence the name payday loan.
The idea is that once you receive your next salary, you repay the amount owed to avoid any long-term debt. Think of it as a friend helping you out or your employer providing you an advance on your monthly wages without the social stigma of asking to borrow money.
Typically, payday loans:
- have a smaller denominational value (the amount being borrowed)
- shorter repayment period (2 to 3-week timeframe)
- are repaid in full at the end of the month, usually around your ‘payday’
- can offer repayments in instalments for longer term loans
- are used for expected financial needs
- have higher interest rates (APR)
The industry has changed a lot during the last 2 years and the understanding of what a payday loan is has changed with it. Today, the average loan period is 3 months, yet this is still called a payday loan due to the fact these loans are quick and easy to apply for (compared to regular bank loans).
Peachy is a payday loan direct lender in the UK and is one of the few trustworthy providers that continue to offer traditional loans and credit.
How do payday loans work?
Payday application decisions are usually instant, with the loan deposited either on the day or the following working day. The approved application will be counted as an unsecured loan, meaning that it is not tied towards an asset like a house or car, should repayment not be met.
Within a payday loans UK agreement, there are two parties – the lender and the borrower, each with responsibilities that must be met as part of the signed agreement. Importantly, this is referring to the loan repayments and the agreement to pay the loan interest.
Payment methods can include:
- supplying a post-dated cheque
- a recurring payment facility – standing order or direct debit to avoid late payment charges and additional fees
Failure to repay on time will further impact your financial credit history.
Do payday loans impact credit scores?
According to Experian, a leading UK credit scoring agency, payday loans online do not impact your credit score if you repay them in full and to the agreed payment terms. Remember, you do not have a single credit score, as each credit scoring agency has their own criteria for assessing your score, that will impact you when applying for credit.
What you need to know about APR, fees and repayments
For consumers in the UK, payday loans are regulated by the Financial Conduct Authority (FCA), designed to protect consumers from unscrupulous lenders and their tactics. The FCA also stipulate that payday lenders provide clear and transparent guidelines and information about their products to consumers.
“Specifically, the FCA ensures that potential borrowers are aware of the costs involved in taking a payday loan.”
Due to payday loans having a short loan period and small amount lent, they have a high Annual Percentage Rate (APR).
Well, simply put on such small amounts over a shorter-term period, this is how payday lenders earn their income. Furthermore, you are paying for the convenience of receiving cash quickly, without rigorous paperwork like you’d expect with traditional financial institutions.
There are additional charges that you need to be aware of including:
- processing fees
- other associated charges depending on the lender.
Compared to traditional credit sources, these charges have been regarded as expensive.
Should you decide a payday loan is for you – always examine the fees involved.
Can I still apply for a loan, even if I have poor credit?
For many, having bad credit can be seen as a stigma and worse, not being able to apply for loans and credit cards.
Poor credit is a phrase used to describe those with a history of poor financial circumstances or have suffered when managing their finances. Those who have a poor credit historically have missed credit obligations like a utility bill, credit card or not repaying a loan on time.
Poor credit then, is an indication that one borrower is likely to be riskier to lend to than another.
Those who have a low credit rating then find it extremely difficult to find credit to manage their lives. Examples of this could be:
- Continually repaying loans late
- Failure to repay a loan in full
- Bankruptcy or Individual Voluntary Arrangement (IVA)
- Had your home or car repossessed
- Debt passed to collection agencies
How do I know if I have bad credit?
Like any other credit application, applying for a payday loan is no different. Each lender will use a different credit agency to aid them in correctly assessing your application.
Those with a low credit rating could be accepted dependent on which credit reference agency the lender chooses to use.
Before you apply, you should check your credit score with several credit reference agencies to determine whether you are likely to be accepted or not by a lender.
Not sure what your credit score is? You can visit Noddle.co.uk to find out.
When to apply for a payday loan
Typically, financial pressures occur throughout the year and can be planned. Yet, even with the best financial planning, household personal finances can go awry – and when households least expect it.
- broken boilers
- paying tax bills in April
- school trips
- medical costs
- car breakdowns
- or worse – a loss of a job and regular income.
“Payday loans can be a source of reassurance during a household financial crisis”
It’s during these circumstances that you may consider a payday loan to help you bridge the gap between monthly salary payments to pay for these sudden unexpected costs.
You can use them at any time you think they will play a role in helping you balance your monthly budget.
Although regulated the same as bank overdrafts and credit cards, payday loans are more flexible when it comes to credit assessment.
Plus, unlike borrowing money from friends, you don’t have to disclose your financial situation to loved ones!
“Savvy customers utilise payday loans as a short-term credit option as a viable alternative to traditional finance, that is restricted by tougher regulations”
When not to use a payday loan
Payday loans are not a permanent financial or long-term solution, they should only be considered as a temporary measure.
For example, never take out a loan to pay for:
- planned expenses (like rent or mortgage payments)
- repaying existing debt
- never, ever, be used to gamble with, in the hope of making more money
Plan ahead, and only use payday loans online for life’s little emergencies.
There are several short-term financial solutions for those financial bumps in the road, and payday loans are one option.
Should you decide that a payday loan is the only solution viable for your circumstances, ensure you find the right provider for you – one that is secure, transparent about fees, and responsible in lending you the money in the first place.
Payday loans should always be considered a temporary short-term solution to your financial situation – so do your homework and find the right lender for you.