If you find yourself in a situation where you need cash fast, you may be considering taking out a payday loan. But if you’re new to short term credit, you may not know much about payday loans themselves, or what lenders are available. You may also be concerned about eligibility.
If this is the case, or if you simply want to find out more about payday loans and lenders, we’ve outlined the basics for you below.
Payday Loan Definition
When it comes to defining a payday loan, the clue is definitely in the name. Unlike an instalment loan, where you’d pay the loan back in (you guessed it) monthly instalments, with a payday loan, you would repay the loan in one full payment – usually on your next payday. This means that you may only need to borrow the funds for a few days or weeks at a time.
The loan value is also typically lower for a payday loan than other types of short term loans – generally around £100 to £500. Any more than this would probably be difficult to repay as a lump sum when you receive your wages.
People often take out payday loans to cover unexpected expenses such as car repairs or an urgent vet bill. Because they are used to pay for such emergency costs, payday loans are almost always quick to apply for, and lenders tend to promise you’ll get the funds you need within a few hours, or by the next business day. You won’t always have time to wait around!
Am I Eligible for a Payday Loan?
In terms of eligibility, payday loans are surprisingly accessible. Obviously the lending criteria varies slightly from lender to lender, but as long as you meet the requirements below, you should be able to get a payday loan:
- Be aged 18 or above
- Live and work in the UK – this can be full time or part time employment
- Have a UK based bank account
You may also need to have a working mobile phone and email address, so that the lender can get in touch with you to confirm all the loan details.
A lot of people are concerned that they won’t be eligible for any type of loan if they have bad credit. They may have been turned down by more traditional lenders, such as banks, if their credit score were too low. However, when it comes to payday loans, your credit history is generally less important than factors like your employment history and your income and expenditure. As long as you’re able to make the due payments without putting yourself into any difficulties, payday lenders will consider your loan application.
- A payday loan is a small loan that is repaid in full when you next receive your wages. These loans are typically taken out to cover unexpected expenses
- To be eligible for a payday loan, you’ll need to be working full or part time, be a UK resident with a UK based bank account, and be aged 18 or over
- Payday lenders consider all types of credit history – even if you have bad credit, you should still be eligible for a payday loan
- There are a number of payday loan alternatives, should you need to borrow a larger loan amount or pay back the loan over a longer period. These include instalment loans, guarantor loans and secured loans
- New payday loan lenders don’t always offer the cheapest rates – it may be a better idea to use comparison sites and broker services to compare interest rates
Payday Loan Alternative
After considering your options, you may actually decide that a payday loan isn’t the best option for you, and look for a payday loan alternative. If you need a larger loan, for instance, or to spread the repayments over a longer period of time, the below lending options may be better suited to your needs:
- Instalment Loans: With an instalment loan, you can borrow a larger amount, and then make repayments over several months or years.
- Guarantor Loans: A guarantor loan is essentially the same as an instalment loan, except that they often offer lower interest rates if you have a guarantor with good credit. Your guarantor agrees to make the repayments if you can no longer do so.
Secured Loans: Secured loans also have lower interest rates, as the borrower puts up collateral against the value of the loan. These loans are often called homeowner loans, as your home is generally the collateral used. You have to be careful with secured loans, as if you can’t keep up with the payments, there is a risk of your home or property being repossessed.
Brand New Payday Loan Lenders
It can often be tempting to look for new payday lenders, in the hope that they’ll be more innovative, and be able to offer lower interest rates. Unfortunately this is not always the case – a lot of the more well known lenders, like Amigo Loans and Lending Stream, can often offer better rates.
The best way to compare interest rates isn’t to look for the newest payday lenders, but to use loan comparison sites and credit brokers. Comparison sites can give you a better idea of what options are available, and brokers like My Financial Broker can match you with the cheapest lender most likely to approve your loan application. So if you’re looking for a payday loan, we can provide you with a free no obligation quote today!