Payday Loans Overview

With how popular logbook loans are in UK, chances are you've already heard a lot about the financial product or you may already have applied for one. But for the benefit of first time applicants and beginners, below is an overview of what and how payday loans work.

What are payday loans?

Payday loans are short-term unsecured loans that are currently widely available in UK. You can get it both online and in the high street. To apply, all you'll need to provide is proof of identification and employment. Payment is expected on your next payday as the name of the loan clearly implies.

How much can you borrow?

Since the loan is unsecured, the loan amount is smaller but still flexible. Borrowers can choose from 100 up to 1,000 which you can use for any purpose. You borrow 200 for car repair or overdue bills, 500 for a major investment or 1,000 for medical expenses. In general, the reason behind your loan is never ask but it's wise to only borrow when truly necessary.

How long do the terms last?

Majority of payday loans has terms ranging from 1 day up to 3 days. Some lenders, however, are offering more freedom for borrowing allowing terms of 3 or 5 months maximum.

Who can apply for payday loans?

Anyone who is of legal age, a resident of UK and employed can apply for a payday loan. It doesn't matter if you have poor credit rating. Apply anyway because many lenders are now offering no credit check loans to make it easier for borrowers to get funding for specific purposes.

How much is the interest rate?

On average, Representative APR for payday loans is somewhere at 1,000% or more depending on the lender's rate. Let's say you'd want to borrow 200 at a term of 28 days. If the variable APR is 1,734% and the p.a. is fixed at 326, that would mean that you'll end up paying a total of 250 at the end of the term.

If you're looking for a lender, you can compare the top choices available in UK according to Representative at http://paydayloans.money.co.uk/.

When to apply for a payday loan?

Because payday loans come with steep interest rates, it is important to remember to only borrow when you've exhausted other cheaper options. You can try family and friends, credit unions and even peer-to-peer lending as these alternatives are definitely cheaper than payday loans. If you're still unable to raise the funds that you need, then it's the time to try the financial product.

What happens if payment is delayed?

The fact that payday loans are unsecured can be an advantage when it comes to nonpayment. Even if you fail to make payments on time, you don't have to worry about your home or your vehicle getting repossessed. On one hand, it can also be a disadvantage because lenders use it to rack up the interest rates higher when the payments are delayed.

The only for lenders to deal with the risks is through the interest rates. As a borrower, it is your responsibility to stick with the terms to avoid getting into even more debt. As a simple rule to follow, you should only borrow a payday loan for emergencies. As much as possible, do it only once and do not opt for renewal once your term is up.