Simply put, a payday loan is a loan extended to borrowers for a very small period of time, usually until the next paycheck comes through. Its flexibility and quick availability makes payday loans an excellent choice for those whose credit score has taken a beating. And, it is also easy to obtain.
You can get a short term loan UK easily with your salary as an income proof. There is no long waits at the bank or negotiations with lenders to get the loan sanctioned. There are still many things about payday loans that you need to know and be aware of. This blog post is a quick summary of all that. It will help you make informed decisions as well as get the best terms for your loan repayment.
Let’s get started.
Terms of eligibility
Literally anyone of legal age can apply for payday loans. You can have a good credit score or one that is slightly damaged, it doesn’t matter. However, your location of residence matters to avail payday loans. You must be residing in a State where the payday loans are not legally restricted. Refer to this list of States where payday loans are ruled illegal.
The Rate of Interest
Payday loans are charged interest in two ways. First, you could be charged a flat rate of interest or be charged a pro rate interest, that is £10 to £10 for every £100 borrowed. This is one of the catch points of a payday loan. If you are not good with the math for the sum of money your are borrowing, you could end up paying a hefty amount of interest. So make sure you are chalking out the interest amount with the lender before signing the dotted line.
The repayment term is short
As the name suggest, a payday loan is used for short-term financial requirements. They need to be repaid within a short time frame too, usually within the next month or when the payday arrives. Since the repayment term is also short, the rate of interest and the risk involved is also less.
It is safer
Payday loans are taken against paychecks which makes them a safer bet. Unlike business owners whose income patterns are erratic, salary paychecks are regular and come on a definite date. Hence, it is safer to bet against them. Lenders also feel a sense of relief since they know the repayment would not bounce under normal circumstances.
Your credit score does not matter
One of the myths surrounding loans is that borrowers need to have a good credit score. While this makes sense for common loans, for payday loans this is not the case. You can avail them if you have a regular job with a constant salary.
Bringing it all together
According to the British Bankers Association, the average APR for a personal loan in the UK is 8.81%. For a salaried individual, that amount of interest is sure to burn a huge hole in their debt repayment plans. Payday plans can help them avail quick finance as well as keep their cost of debt to a bare minimum.
Also, payday loans are a lot safer since it is taken against a definite source of income. The rate of interest is also affordable for most individuals, especially salaried-class employees. All you have to check is that the State where you reside considers payday loans as a legal practice. The shorter repayment period combined with quick availability makes payday loans a reliable source of finance for your cash crunch days.