Everything you need to know about payday loans

Apply for a payday loan online and get up to £1,000 today!

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 support might be available, but it’s either not enough or not offered to people with low 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 banks begin tighten their rules on loans, there is a simpler, more straightforward option.

What is a payday loan?

A payday loan is a short term solution to borrowing small amounts of money to help households between their ‘paydays’ – hence the name.

The idea is that once you receive your next salary, you repay the amount owed to avoid any long-term debt. It’s like a friend helping you out or your boss giving you an advance on your monthly wages without having to ask 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. Today,  loans are usually paid back in 3 months, but they are still called a payday loans because the loans are quick and easy to apply for (compared to regular loans you would apply for with your bank account).

Peachy is a 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?

Application decisions are usually instant, with the loan deposited either on the day or the following working day. Approved applications 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.

For payday loans in the UK, there are two parties – the loan lender and the loan 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.

But, do they impact credit scores?

According to Experian, a leading UK credit scoring agency, payday loans 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, these 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 out a payday loan.”

Peachy is a fully authorised lender and is regulated by the FCA. You can find our profile here.

Due to these types of loans having a short loan period and small amount lent, they have a high Annual Percentage Rate (APR).

Why?

Well, simply put on such small amounts over a shorter-term period, this is how 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:

  • interest
  • processing fees
  • other associated charges depending on the lender.

Compared to traditional credit sources, these charges have been regarded as expensive.

Should you decide that this type of loan is an option for you – always examine the fees involved.

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How can I check my credit score?

Like any other loan application, applying for a loan at Peachy is no different.

Each lender will use a different credit agency to aid them in correctly assessing your application.

Those with a low credit or no 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.

Noddle, free credit check

Applying 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.

Examples include:

  • broken boilers
  • paying tax bills in April
  • school trips
  • medical costs
  • car breakdowns
  • or worse – a loss of a job and regular income.

It’s during these circumstances that you may consider a 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.

Positive review of Peachy payday loan service

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!

Before you apply…

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

There’s plenty of options available if you find yourself in need of a short term loan. But, if a payday loan is the only option you can find, make sure you find the right lender – one that is secure, transparent and responsible. Remember, payday loans should only be used as a temporary solution.

Peachy
14.11.2018
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