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Short-term loans are usually very tempting when you need money fast. The fact that most lenders make them easily accessible to borrowers makes them a popular go-to option for those with dire financial needs. Still, they come with both pros and cons and exploring both sides of the coin should help you decide whether this type of loan will make a good choice for you.
Payday loans explained
A short-term loan, payday loans, as the name implies are loans that need to be paid off on the borrower’s next payday. Most of the time, this is by the end of the month. Available through payday lenders, they are ideal for people that need cash fast.
Most payday lenders care little for their borrower’s credit score. What they care more about is whether they are earning enough to pay back the loan and the interest rates involved and if they have a bank account where the funds are going to be deposited.
Reasons for taking out a payday loan
Most of the people that take advantage of payday loans are those with bad credit score. Since they cannot get access to standard loans through normal channels, they refer to lenders who are willing to take the risk of letting them borrow cash despite their credit record. Most people that take out payday loans are often those that do not have money saved up for emergencies and those who are faced with a sudden expense and their next pay cheque is still weeks away.
Things to remember
The high costs associated with payday loans should be enough reason for borrowers to only consider it when they have exhausted all their other options. Once they do take one out, it matters that they get it paid off on time too to avoid any more additional fees that are already quite hefty, to begin with.
Payday loans are short-term credits that are designed to help tide borrowers over to cover their financial shortage until their next payday. While most lenders expect borrowers to pay the principal and the interest on their next payday, or by the end of the month, there are lenders that may allow borrowers to choose their preferred term.
How Payday Loans Work
Lenders can lend between £100 to £1,000, though this can vary from lender to lender. Considering how this is a short-term loan, expect that the interest rates will be generally high. However, the fast processing time and the lenient requirements have made these loans the go-to among many a borrower, especially those whose credit records aren’t especially spotless.
The funds, once the loan is approved, is typically paid into the borrower’s bank account. Usually, this is within 24 hours of the loan approval with some even releasing the funds a few hours upon approval. Repayments are usually taken from the borrower’s bank account once due. Typically, lenders charge £24 for every £100 that is borrowed.
Requirements for Payday loans
There are basic requirements that potential borrowers will need to meet to get approved for a payday loan. A borrower needs to be 18 years old and a UK resident. He must have a working bank account as well as this is where the lenders are going to deposit the funds directly. This is also the same account that they will be deducting the payment from come the loan’s due date.
In addition, a borrower needs to have a steady source of income too. He need not be employed, but must prove that he gets a steady source of regular income to ensure that he can pay off the debt by the time it is due.
Benefits of Payday Loans
The speed in which one can take out a payday loan is also one of the many reasons it has grown in such popularity among the borrowing public over the years. The requirements tend to significantly easier, more lax, and lenient compared to standard bank loans. In addition, most lenders do not require a hard credit check when assessing prospective borrowers, which makes it possible for those with bad credit to get access to emergency funds. Applying for one is convenient too, since most lenders offering this credit are operating online. So, you can choose to send your application through this medium.
Frequently Asked Questions
Must I Have A Guarantor?
Usually, lenders would require a guarantor for borrowers with poor or no credit history. A guarantor will serve as an added security if in case the borrower defaults on the loan. Since unsecured loans don’t have collateral, it is an added risk for lenders. However, if your credit is in good shape, lenders will often approve you without having a guarantor.
Is there complicated requirements I must provide?
No. The application process is simple and straightforward. All you need to provide is your personal information, proof of income, and employment verification. You also need to provide your checking account information where the money will be sent to. Other than that, you don’t have to provide any complicated documents or requirements to get approved.
How Fast Can I Have The Funds?
The entire process can be completed in as fast as 15 minutes. Getting the results of your application will only take a few minutes. So you don’t have to wait hours or even days to get approved. You can have the funds immediately and we’ll send you a notification once everything is good to go.
What If I Miss My Payment?
We understand that such things could happen. While some lenders may be lenient for one or two months, however, missing your payment could result in serious consequences. It could affect your credit badly and the lender may incur additional charges or fees as penalties for late payments.
You will receive the payment through direct transfers immediately to your checking account. Once approved, the money will reflect on your account within seconds. You will receive a notification once your application results are in.
Got questions? Let us know.