The truth about payday loans
Friday, 25 November 2011
If you've ever found yourself short of cash a few days before payday you will know how difficult it is to make ends meet. Maybe you've been hit with an unexpected bill, or a night out you really don't want to miss is looming large. These things needn't be an issue anymore, as there is now a short-term solution for just this scenario. Payday loans are simple, short-term advances that provide customers with the cash they need to get through the last few days before getting paid.
Payday loans do carry an interest charge (which is made clear when taking out the loan), therefore, this form of loan should only be taken out if you can afford to pay it back on time.
There are a few myths that need to be dispelled about payday loans, the main one being that the interest charged is ridiculously high. While the amount of interest shown as payable is a high percentage, this is only because it is worked out annually (hence the acronym APR, which stands for annual percentage rate). Because the loan is taken out over a short period of time, the interest is not as high as it may seem at first glance. For example a £200 payday loan will accrue interest of £50 over 30 days, but the interest rate is advertised as 1,737 per cent APR. In reality the interest amount payable is just 25 per cent of the total amount borrowed, which is obviously a lot more affordable.
Another myth is that people with a bad credit history or a negative credit report cannot apply for a payday loan. These loans are in fact available to people who cannot get money elsewhere due to a bad credit history, as only the current financial situation of the applicant is taken into account when applying; so there is no need to worry about old County Court Judgements and other bad debts. Another advantage of a short-term loan is that applicants are not required to own property; tenants are welcome to apply as well.
The eligibility criteria for obtaining a payday loan are simple: applicants need to be aged 18 or over and employed on a full-time or a part-time basis; they also need to be a resident of the United Kingdom with a UK bank account.
People who require a payday loan will find that the application process is simple and can be completed in a few minutes. All that is needed is the contact details of the person applying, employment details, including the date paid each month, and the details of the bank the money is to be paid into. There are no other forms to be filled in and the whole process can be done online, with no need for faxing or posting documents. It is normal for any loans that are approved, to be transferred into the designated bank account within 24 hours of applying, and it is common for some lenders to transfer the money on the same day the application is received.
It is vital that people who do apply for a payday loan make sure that they can afford to make the repayments, including the interest charged, before applying. If used correctly, payday loans are a great way to bridge the gap until payday by getting access to a little extra cash.
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