Ten Things to Know Before Getting a Payday Loan
The fact that payday loans are increasingly popular speaks a lot about millions of working-class people’s economic situation. Simultaneously, it speaks a lot about the necessity of the companies that offer these services as people need them now more than ever.
To better understand payday loans and why they are so popular, we made a list of ten things about payday loans. It is a particularly interesting list of things that can be of immense help for anyone considering getting a payday loan for the first time.
1. Getting a payday loan is fast and easy.
Anyone above 18, with income, a bank account, and a credit history that is not completely in ruins, can get a payday loan. One can do the entire process online, via phone, or a combination of both. Most people get their money on their accounts within 24 hours timeframe.
2. There is a 14-day cooling period.
The cooling period is in place for those that change their mind and decide that they don’t want to use the payday loan even though they already received it. If that’s the case, then they can return the payday loan within the first fourteen days. They need to pay the interest rate on credit, and they are out of their contract.
3. FCA regulates the payday loan industry in the UK.
Payday loaners are obligated to be registered with the Financial Conduct Authority (FCA). If a lender is not registered with the FCA, then they might be working illegally, and they might be scammers.
4. Recurring payments
Nowadays, an increasing number of lenders ask their clients to set up a recurring payment, also known as continuous payment authority (CPA). The client gives the lender can take what they are owed from the client’s account. At the same time, it is noteworthy that the client can revoke their right to do so at any given moment. That doesn’t mean the client can get away with not paying their debt, but they can keep their money for essentials like food. Instead, that means that the client can search for other ways to repay the debt.
5. The cost of payday loans is capped by law.
The FCA limits the fees and interest rates people get charged by payday lenders. Overall, the law says that the borrower can’t pay back more than twice what they initially borrowed.
6. Those stuck with their payday loan can ask for help from a free debt advisor.
There is help available for those in need when they cannot figure out how to deal with their debt. You can ask a confidential and free debt advisor for help. Some of the organizations that offer help to people stuck with their debts are:
- Citizens Advice – Scotland
- National Debtline
- Advice NI
- Citizens Advice – England and Wales
- StepChange Debt Charity
- Citizens Advice – Northern Ireland
7. You have the right to refuse to roll your loan over.
By rolling over your loan for another month, you will be charged even more fees and interest rates. Starting from 2014, there is a law saying that payday lenders can’t roll over your loan more than two times.
8. Not all payday borrowers are the same.
There can be an enormous difference between two borrowers in almost any sense of the word. In their terms and agreements, they list in your contract, then in the fees and interest, they offer. Additionally, how they treat their clients. Because of that, it is the smart play first to go windows shopping before choosing who you will borrow from.
9. Payday loans can help you improve your credit score.
As we mentioned earlier, your credit score doesn’t need to be perfect to get a payday loan. At the same time, it can’t be lying in utter ruins as you probably won’t get your payday loan approved. But, if your credit score is somewhat bad, but not that bad, so you can still get a payday loan, you can do some good to your overall credit score. By doing some good, we mean paying out your payday loan on time. By doing so, your credit rating will improve over time.
10. Complaint to the FOS
If you have a dispute with your borrower and feel you are being treated unfairly, you should take your case to the Financial Ombudsman Service (FOS). The FOS can’t punish or fine the lender, but it can help the two parties settle the dispute.