Ten Things to Know Before Getting a Payday Loan

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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.

Thinking of Getting a Payday Loan? Here’s How to be Smart About it

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A payday loan makes a convenient solution for dealing with bills or some other unexpected expenses that pop-up from time to time. After the approval, the money from the payday loan is paid directly to the borrower’s bank account. The entire process, starting from the payday loan application to the moment the borrower receives the money, is super-fast.

Another added benefit is that you don’t need to physically go to the borrower’s premises to complete the transaction. You can do this all by either phone, email, or sometimes a combination of both. 

Convenience is something that almost all borrowers offer. However, the differences are interest rates, application fees, penalty fees, grace period, flexibility, etc. 

How to make the most of your payday loan?

Getting a payday loan is pretty much like buying goods. In this particular instance, the goods are money. In any case, whether you are on the market for money or some other goods, the main rule is the same for everything – try to get the best possible value.

When it comes to payday loans, you get the best possible value by following these principles:

  • Checkout as many online borrowers as possible. A simple Google search will help you find the ones that can serve you. The idea is not to borrow from the first borrower you get across, but rather window shopping first before making any decision. While you are at it, make sure that they are regulated by the Financial Conduct Authority (FCA). If they are not, move on towards those that are. 
  • The lower the interest rates, the better. However, some borrowers compensate for that with bigger application fees and other charges. Because of that, it is important to consider the application charges and other fees when calculating the cost of your loan. The only way to get the full picture of the payday loan is if you add everything together.
  • Reputation is an essential factor in the payday loan industry. The best companies in this line of work can be identified by their continuous stream of positive reviews.
  • Some borrowers will even ask their clients for their Continuous Payment Authority (CPA) approval even before approving your loan. That gives them the right to access take payments directly from the client’s account. On the other hand, any reputable lender, authorized by the Financial Conduct Authority (FCA), won’t sneak into your account without your explicit approval.
  • Keep away from the debt hamster wheel. Your payday loan can get exponentially bigger if you don’t pay it out on time. In just a year, the average yearly percentage interest rate can get as high as 1500%. 
man wearing a suit sitting in a table giving a thumbs up signal

In conclusion

Remember that just because you’ve taken a payday loan from some company, you need to comply with everything they recommend or say you must do. If you doubt their actions, you can always reach out to the Financial Conduct Authority (FCA) and check whether that is within the scope of their rights or not.

Plus, you have your terms and agreements contract covering much of what the borrower can and cannot do. If the borrower is violating some terms, you can tell them that, or you can take the matter to the FCA.

However, know that disputes are not that common, and even when one occurs, the borrower and the client try to find a way to resolve it without the involvement of third parties. After all, payday loan borrowers are a business, and they greatly care about their reputation.

Payday Loans for Absolute Beginners – Everything You Need to Know Before Taking a Payday Loan

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2020 was not an easy year for anyone. The pandemic, lockdowns, and the many restrictions took a high toll on the UK economy. Consequently, many people lost their jobs. Then again, many struggled to get by from paycheck to paycheck. 

For the working-class people, it was the second half of some months, or when an unexpected expense occurred, presented the greatest challenges to make it through the month. 

To make it till their next paycheck, many of them turned toward payday loans. 

If you haven’t taken a payday loan and are considering it, please bear with us for a while. We will explain pretty much anything that one needs to know about this type of loan. By the time you are done reading this, you will know whether taking a payday loan is the right thing for you or not. 

What’s a payday loan?

This type of loan is designed to help working people that are in urgent need of cash until their next payday. Unlike classic loans, the application process is incomparably faster, and you can do it via phone or email. The approval process is also quite fast, and it won’t take too long before you learn whether you will get the loan or not.

Who can apply for a payday loan? 

Those over 18, have a full-time job, and a bank account can apply for the loan. Additionally, lenders might check your credit history before they decide whether they will award your loan or not. However, your credit history doesn’t need to be perfectly impeccable. 

Getting a payday loan

Once you are approved, the money is deposited into your account. The bank might need some time to confirm the transaction, but typically, that doesn’t take more than an hour or two, sometimes sooner.

Typically, payday loans range anywhere from £100 to £1000. 

The amount of money you will borrow is something that you need to decide based on what you need the money for and your ability to promptly repay that loan.

Paying back your payday loan

Nowadays, the payback of your payday loan is automatic with most lenders. The lender will take the loan, the interest rate, as well as any other fees from your bank account. It is a process known as the Continuous Payment Authority (CPA). It is up to you to make sure that you have enough money in your account to cover the payday loan. If you don’t have enough money to cover your loan, the lender might charge you additional fees once your bank account is topped. 

What happens if you can’t repay the payday loan?

This is also a possibility that one needs to consider. In case the borrower can’t repay its loan in time, the next step is to notify the lender so that you can work out a repayment plan. Furthermore, one can also consider reaching out to an independent debt charity like StepChangeDebt Charity, The Citizen’s Advice Bureau, and National Debtline.

The downside of a payday loan

The downside is pretty much the same as with any loan- you have to repay it along with an interest rate and sometimes even certain charges. The rate and the charges can vary from lender to lender. 

Bottom line

It’s never pleasant to be short on cash to meet the month’s end or buy some necessity. A payday loan is one of the fastest and easiest ways to deal with the unpleasantness of being low on cash. 

If you find yourself in such a situation and have to get a payday loan, it is advisable to shop around first. Figure out who has the lowest interest rates, the lowest fees, and choose accordingly. Other than that, don’t loan more than you need or you can afford, and everything will be fine.