Payday loans are a short-term, financial product which are ideal when you need funds in an emergency. Maybe money is running short just before you get paid, or there might be an urgent need for cash to pay a repair bill which simply can’t wait.
The Pros & Cons of Payday Loans
The main advantage of payday loans is that applications to a payday loans lender can be made easily online. They are also very fast. Loans are granted within hours, and money is deposited into your bank account immediately afterwards. The major drawback of these short-term loans is that they are extremely expensive. The interest rates are much higher than loans from mainstream lenders. There are also default fees and associated charges for borrowers who are late, or miss their loan repayments.
Changes in Payday Loans UK
Since the FCA (Financial Conduct Authority) became responsible for the regulation of the payday loans UK market in 2013, they have tightened up the rules for lenders. This has benefited consumers since they are protected from abuses which used to exist in the sector. For example, borrowers can’t refinance (or roll over) the loan more than twice, and there is now a price cap which limits how much lenders can charge. On the other hand, these regulations have also made it more difficult for borrowers to get a loan. As part of the application procedure, reputable lenders will carry out an affordability check. This will take into account an applicant’s income as well as their existing monthly expenses. Lenders will also contact a credit reference agency.
Finding the Best Payday Loans UK
By law, all payday lenders must now appear on at least one price comparison site. The best way to find out what is available on the market is to use more than one of these sites. By entering how much you wish to borrow and the duration of the loan, the site will provide a list of UK lenders. Although the site will supply the lender’s APR, a sliding scale will inform you of how much you will exactly have to repay in total. For your added protection, you should make sure that the payday loans lender is FCA-registered before applying. Lenders might ask you to set up a CPR (Continuous Payment Authority) so they can withdraw the repayments directly from your bank account.
These short-term loans aren’t suitable for repeated use, nor to supplement a low income. However, if you are in need of urgent loans payday lenders provide the ideal solution.