Payday Loans: A Brief Guide

Payday loans have fast become one of the main forms of short term money lending, provider customers with greater options when facing financial uncertainty. But what exactly are payday loans and how do they work?

The following guide summarises some of the main aspects of a payday loan.

Loan

A pay day advance is a loan which is offered on a short term basis only. It is called a payday loan because it is designed to synchronise with your payday schedule meaning that you make the loan repayment after your next date of pay.

Interest

The interested accrued on payday loans can look high at first glance. This is because interest rates are quoted as annual figures and therefore do not represent the amount paid back over a short period of time. As payday loans are designed exclusively for short term use the interest repaid is highly affordable. Typically an £80 loan will accrue a total amount of interest of £20 for the specified period (typically one month or 31 days). This means that an £80 will require a repayment of £100 by the given date.

Repayment

The repayment process involved with a payday loan is extremely simple and easy to manage. Payday loans do not use length monthly repayment schedules and instead require customers to make one single transaction, usually by debit card. Using the above example, this means that a person borrowing £80 will be required to make the full repayment of £100 via one debit card transaction before the end of the loan agreement.

Amount

Payday loans are available in a range of different monetary values. Typically, providers will offer a range of loan amounts from £80 to £800, with some providers even offering £1000 loans. The maximum loan amount you are offered depends on your personal situation, including your salary information, but will not take into account your previous credit rating.

Availability

Payday loans are readily available to a diverse audience of people. There are very few restriction placed upon payday loans meaning that the vast majority of people are eligible. Currently, the restrictions are as follows:

• The applicant must be a UK resident.
• The applicant must have reached the age of 18 years.
• The applicant must have an active, open, UK bank account.
• The applicant must be in some form of employment, either full time or part time, and must be willing to provide details of their salary along with the date of their next payday.

Application

The application process for payday loans is very quick and easy and can be done either in person or online. Certain documentation and information, such as salary details and identification, must be presented in order for applications to be considered and processed. Credit checks are not conducted whilst reviewing payday loan applications meaning that your credit rating will not affect your eligibility. Payday loans could, however, improve your credit rating by allowing you to demonstrate your ability to make repayments.

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