There are many people that still do not know how a payday loan works. They have not used one before and the fact that they do not know how they work puts them off being able to use them. It is therefore good to have an understanding of how the loans work so that we can decide whether it might be a suitable loan for us at some time.
- Who are the loans for? – payday loans came about because it was noticed that those people with a poor credit record had no where to go if they needed to borrow money. Payday lenders do not do a credit check and this means that it is possible for anyone, regardless of the credit status to borrow through them. They are also able to arrange loans really quickly. This is partly because they do not have to take time doing a credit check, but they also often have staff available all of the time, even at weekends and nights to be able to deal with your application. It can mean that you will have money within a few hours. This means that the loans are also suitable for someone who needs money really quickly. They also only lend small amounts of money, which is something that might be hard to get with other loans which often lend large amounts of money. This means that you could end up borrowing much more than you need, repaying over a longer period and paying more interest if you use a different type of loan.
- Application process – the application process is really easy for a payday loan. With some lenders you will be able to apply over the telephone and with some you will be able to apply online. The process is really easy and will not take very long. There is not a lot of paperwork to complete you will just need to give details of how much you want to borrow, when you need it, when you want to repay it and what you bank account details are and you will need to send some ID. Then you will just have to wait to find out if you get approved. Most applicant will be, you just need to have an income and a bank account, be over 18, be a UK resident and not have another payday loan outstanding.
- Getting the money – within a few hours or days of application (depending on the lender) you will be sent the money. This is a lot quicker than you will get money form many other lenders and can therefore be a lot more useful, depending on how quickly you need the money. It will be sent by direct debit into your nominated bank account, which will normally be the same bank account that the repayment will come out of. Then you will be able to use it as you wish. You might want to transfer the money to pay a bill or pay someone or draw it out as cash to buy something that way. It will be up to you how you decide to use it and as it appears in your current account it will be very easy for you to distribute it as you see fit.
- Repaying the loan – repayment of a payday loan is different to many other types of loan. You will usually repay it all in one g. A direct debit is set up for the repayment, which will include the amount that you have borrowed as well as the interest. This is set up to go out of your account on the day that you are paid so that there is a good chance that you will have the money available to repay the loan. It is important for you to make sure that this will be the case as if you have other direct debits going out, an overdraft to repay on that account or your pay is low, then there is a risk that you will not be able to repay. Just make sure that you calculate, before you apply, how much you will be able to afford to repay and find out how much the repayment will be, so that you are sure that you will be able to manage. It can be great repaying everything in one lump sum as it gets the loan over with really quickly. However, you do need to make sure that the amount that you borrow is an amount that you will be able to afford. If you do not pay, like with all loans, there will be additional fees and so you want to avoid these if you can my making sure that you will be able to repay when you are required to.
So, as you can see, a payday loan is rather different to other loans. However, the way that it works is very simple and it is something which is available for most people to be able to use.