Author: Kelly Richards
Ever used a payday loan? They can offer fast funds when you really need them, and for many people who may lack savings or have no other options, they can be easily found online. But what do you need to know about them before you start an application? How do you ensure you’re using a reputable lender?
Well, below you’ll find all you need to know about payday loans when you need quick cash to cover urgent short-term expenses. That way, if you do find yourself in a position that needs one, you can make the best choice for you when needing to make a decision quickly.
Why Payday Loans Can Be Helpful
Payday loans can give you access to cash when you’ve exhausted other means first, often within hours. This makes them a suitable option for urgent financial needs that you would otherwise struggle to pay. Unlike a personal loan, they typically have more open eligibility requirements, helpful if you have a low credit score. They also enable you to borrow much smaller amounts than a personal loan, which would generally start at £1,000 upwards, so if you only need a £300 loan to cover a small, unexpected repair bill, a payday loan would be the better option.
Their convenience is unparalleled too, with online applications and instant approval processes for payday loans making them a fast option when time is against you. For those facing unexpected expenses or emergencies, payday loans provide the lifeline you may be looking for.
What To Consider First About Payday Loans
Despite the convenience they bring, you should proceed with caution when applying for payday loans. Borrowing money in the short term can be expensive, so if you can settle your urgent expense through other means, this will always work out better for you. However, if this isn’t possible, you should ensure you understand the interest charge and any fees that may accompany the loan.
The good news is there are many reputable payday loan lenders who are authorised by the Financial Conduct Authority (FCA) that will only agree to a loan if it is sustainable for you. There are lenders that are unauthorised, and you should avoid them as best you can. The FCA has tightened regulations to ensure that responsible lending practices are followed in recent years, so check the lender you find is approved by the FCA before applying.
The terms and conditions of the loan should be transparent so that you can see how much interest you will need to pay on the payday loan and that there are no hidden fees. If it isn’t clear, make sure you question this with the lender and compare your options too.
Responsible Borrowing Tips
As there are both pros and cons, just like with any form of borrowing, you’ll want to ensure you’ve considered both before signing on the dotted line. When used responsibly and only to cover essential, emergency expenses, they can be useful. Payday loans are not designed to cover ongoing payments or non-essential purchases, so keeping this in mind will ensure you do not become overly reliant on them.
Also, only borrow what you need, rather than the maximum amount available. It can be tempting to choose a bigger loan and a longer repayment term but keep in mind that this will mean paying more in interest and holding onto the loan for longer. Check what you can afford for repayments and choose the shortest repayment term you can manage for the smallest loan amount you need. Most payday loans will offer up to 6 months for repayment, so see if you can reduce the term length overall.
Be sure to research the lender before going ahead with any loan. It doesn’t take long to check whether they are an authorised lender, and if it isn’t clear, check the FCA register online. If you notice the lender is charging an upfront fee, avoid going any further as this could be a scam – there are plenty of lenders that won’t charge this for their services, so keep looking if so.
Lastly, don’t forget to check alternative sources of funding before you proceed, such as using emergency savings, asking friends and family, or even speaking to your creditors first. You may be able to negotiate more time to settle the unexpected bill by doing so.
Overcome Your Short Term Financial Challenges
So, hopefully, you have a better understanding of payday loans and when they can be appropriate. Always consider your options first and if you can avoid applying for credit altogether. If a payday loan is the only suitable option for you, just be sure to check they are FCA-authorised, they offer transparent terms, and you can easily see how much the total loan charge will be to match your affordability before clicking apply.
Author Bio
Kelly is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
