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What is a Payday Loan?

What is a Payday Loan?
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A payday loan is a small short term unsecured loan granted by a lender to a borrower. The expectation is that the loan would be repaid with the borrower’s next payday check. Some people refer to payday loans as cash advances, as they are designed to help the borrower access expected cash in advance before their next payday. The loans are referred to as short term because they’re usually only open a few weeks – before your next pay day. They are unsecured, because the borrower does not have to provide collateral to collect the loan.

Payday loans are becoming increasingly popular in the UK. This is because lot of people find it as a quick and hassle free solution to get fast cash when needed. With these loans a borrower who is desperately in need of funds can get needed cash without having to wait until their next payday. This has helped a lot of families and individuals meet up with unexpected surges in their monthly budget.

There are now several payday lenders in the UK offering quick and fast payday loan solutions in several countries. A borrower who is interested in taking out a payday loan should first take time to understand the basics. What is a payday loan and how does it work? It is also important to shop around for a reputable lender who would not take advantage of your financial situation by charging excessive interest. With a reputable lender, a payday loan can actually help you out in times of financial need.

The Limitations Of Payday Loans

Payday loans are very useful cash advance loans that are given to a borrower to be repaid at their next payday. These type of short term loans are getting more popular. More people now turn to this quick cash solution to get the cash they need before their next payday check. However, payday loans are not without a few limitations. Here are a few basic limitations of payday loans.

One of the main limitations of payday loans is the fact that they are very short term loans. This type of loans is usually taken just a couple of weeks before payday. The full loan amount and principal would have to be repaid by the next payday. Borrowers do not thus enjoy extension of the repayment period. They can’t spread the repayment period over several months as with other regular loans. The borrower would have to make full repayment along with interest at the next payday. Some low income earners or people with debt issues are sometimes plunged into a vicious circle of recycling their income to pay payday loans on a regular basis. They basically have little to live on after repaying the loan.

Another limitation of payday loans is that the amount that can be loaned is dependent on the income expected. This is not thus a good avenue for raising large sums of money. The expected income must be able to repay the loan plus interest. If you are however seeking for easy and fast cash no matter your credit score standing, payday loans may just be what you need.

Why Use a Payday Loan?

Payday loans are useful tools used by people across the UK to access quick cash when they find themselves in dire financial straits before their next pay check is due. In the UK, the payday loan cash advance industry is large. It’s also growing, with over £1 billion being borrowed every year by millions of people in the UK.

The question that thus arises is why use a payday loan? Is this quick cash option really worth being considered? One of the main attractions of payday loans is that it is easy and fast to access. These short term loans have actually helped a lot of families and individuals who found themselves suddenly in a position where they needed quick cash. A lot of people with relatively poor credit who would find it hard to access conventional loan types find payday loans a quick and easy alternative.

Here are some reasons why people take payday loans and why you may also consider it. For one, payday loans are easy to qualify for. Most times you just need to provide employment and income verification and you are done. The loans are also quite quick to process, enabling people to access needed cash within hours. You do not need collateral, and you do not need to waste too much time applying. Bad or poor credit ratings furthermore may not affect your chances of accessing the loan. A payday loan could be a great way to access a quick cash advance when you need it.




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