A payday loan is a small cash advance on your monthly payday, issued by moneylenders to help borrowers through short-term cash flow problems. The average amount of a payday loan is around £300, and the loan period tends to be under two weeks.
Due to the increase in popularity over the last few years, payday loans now tend to be handled online, and are quick and simple to manage. In most cases, the borrower can fill out an online application, gain approval, receive their loan, and manage their account balance over the company web page.How Much Does it Cost?
Payday loan companies are obliged to show their Representative APR (annual percentage rate) in all advertising and conditions of the loan, so although it varies from company to company, you will be able to easily spot the interest rate.
The APR may be well over 1,000% for some of the UK payday lenders. However, since payday loans are usually repaid in less than 30 days, this high APR doesn’t necessarily represent the actual amount to be re-paid.
As the cost of a short-term payday loan may be cheaper than late bill penalties, overdraft fees, or credit card payments, the interest cost is often deemed worthwhile. If, however, the loan repayment is late, extra charges will be applied, and this can become expensive.How do I Qualify?
In order to qualify for a payday loan you need to fill out an application, either online, or at the office of the lender. Many lenders have "shops" where you will need to bring your bank details, bankcard and a pay slip in order to apply.
You must be over 18 years old, and the main basis for qualification of a payday loan is that you are employed. Since the loan repayment is taken from your monthly income, you must be able to show that you will be able to repay the loan on the next payday.
If it's your first time applying for a payday loan, many companies will have a limit as to how much you can borrow. On subsequent loan requests you will be eligible for a higher amount, but this will heavily depend on your monthly income.
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