Payday loans have been around for years and this is because they provide access to credit to people who are financially excluded from some other mainstream credit products. When an emergency cash expense arises, it can be hard to juggle your finances and meet the bill. Often, being able to borrow a small amount of money until payday makes managing your finances easier and helps to prevent you from missing other priority payments in an attempt to pay the unexpected one.
Payday loans should only really be used in an emergency – when the payment cannot wait a few more days or weeks. But even if the need for cash is urgent, you should still take a few minutes to compare payday loans and make sure you are getting the best bang for your buck. In this informative blog, we discuss:
To define a payday loan is quite simple: it’s a small amount of cash that you borrow for up to a month, which you repay on your next payday. Usually, you submit an application with the lender, they will conduct their affordability and creditworthiness checks and then provide you with their loan decision. If the application is approved, you will typically receive the funds within a few minutes, although most lenders advise it could take up to two hours. Then, you can spend the funds as you need to, and repay the loan plus interest on your next payday.
Part of the assessment will involve a hard search on your credit file, which other lenders can see, so you should only apply for a loan if you really need one as it can be a deterrent to have several hard searches recorded.
A payday loan is a type of short term loan, in part due to its one month loan term. But there is another type of short term loan called an instalment loan. An instalment loan is similar to a payday loan, but instead of repaying the loan in one lump sum on your next payday, the loan repayments are split over several months instead. You can generally borrow for up to a year, but commonly instalment loans have loan terms of between 3 and 6 months. While the overall repayment will be more than if you borrowed a payday loan, the monthly repayments are much smaller which can make them more manageable for a lot of people to budget for. Instalment loans are becoming an increasingly popular option compared to payday loans.
Seeing how payday loans compare helps you to choose the right loan for your circumstances. Payday lenders have to follow strict regulations set by the FCA when it comes to lending, but it doesn’t mean all of the loans are identical. Different lenders provide loans with different loan terms, payment flexibility, fees and charges, and even the interest rate can vary. This is why it’s always worth taking a few extra minutes to compare payday loans before clicking on the first link you see.
Most payday lenders are based online so that the service is much more accessible and not bound by location. Naturally, most payday loan comparison sites are also online, so they can quickly direct you through to the lender of your choice and you can submit an application.
We’ve created a short list of questions to ask yourself if you are thinking of borrowing money. This is to help reduce the risk of applying for credit unnecessarily, and ultimately save you money. While we compare payday lenders, we would never advise you to apply for a payday loan if you didn’t really need one!
Always check that you are using a free loan comparison service and consider using more than one comparison site. All payday lenders must be listed on a loan comparison site, but there are no rules about which ones they should list on, so using two or three sites to compare payday loans can help you get a good picture of which lenders offer the loan you require.
All you need to know about short term loans
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