Payday loans are an increasingly popular method of accessing short-term financial help. But, if you’re considering taking out a payday loan, it’s important to familiarise yourself with all of the relevant facts and figures, and ensure that you truly understand the options available to you.
What are Payday Loans?
Payday loans are a short-term method of borrowing small amounts of money. Normally offering loans of between £100 and £1000, they are designed to be taken out towards the end of the month to help people financially until their next payday.
These loans are generally used for unanticipated emergencies that cause financial difficulties, such as boiler replacements or car repairs.
When it comes to repaying your payday loan, the repayment plan will vary depending on the provider. Whilst some lenders will expect payment as soon as payday arrives, others will allow you to choose your own repayment period, anywhere up to a couple of months from when you initially took out the loan.
In some cases lenders will allow you to roll your loan over if you are unable to pay on time. But it’s important to be aware that, in most cases, you will incur additional charges and interest will continue to be added. Although payday loans are relatively easy to access, they usually come with very high interest rates and penalties for late repayment.
How do Online Payday Loan Applications Work?
An online payday loan application is normally straightforward and the application process can be completed in a matter of minutes.
When you apply online, you won’t be asked to supply any paperwork or speak to anyone on the phone, but you’ll usually be asked to supply your address, bank details, and employment details. Although your employer won’t be contacted, lenders often run an online credit check before approving the loan to ensure that you will be able to meet your agreed repayments.
Some online lenders will also require more comprehensive information about the customer’s financial circumstances and expenses to understand whether a short-term loan will be beneficial, or have a negative effect on the individual’s money situation. At MoneyPod all we need to know is that you are:
- Over 18
- Reliably employed
- A Resident in the UK
- Have a UK bank account that wages are paid into
- Have an email address
- Employed and earning over £500 per month
The main benefit of applying for a payday loan online is that you will usually receive an instant decision and, depending on the loan provider and your bank, you could receive the money in as little as 15 minutes.
When making your application, you’ll need to indicate how much you want to borrow and how long you want to borrow it for. The lender will then advise how much the loan will cost in total.
This repayment agreement will differ depending on the payday loan provider, however, there are usually two options:
- Payday repayment, where the full loan amount is taken from the individual’s bank account on the day they are paid.
- Repayment over a longer period. MoneyPod offer repayment periods of up to 18 months.
When it comes to taking out a payday loan, you can apply through a direct lender or a broker. A broker finds the best deal for the customer’s needs, arranging the loan, and then receiving and collecting the money when required.