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