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All you need to know about Payday Loans

A direct lender is an alternative to payday loans

Most people have heard about payday loans. But what exactly are they?

In this article we look at:

  • What is a payday loan?
  • Are there circumstances when you should consider a payday loan?
  • Are there alternatives to payday loans?
 

What is a payday loan?

A payday loan is a short-term loan. The name payday loan comes from their original purpose, which was to advance you enough money for a few days to get through the rest of the month until payday.

Many payday loans are now available for up to three months rather than the original few days. They are usually for relatively small amounts of money, between £100 and £1,000. They can be easy to get hold of, for example from high street shops or internet sites.

A payday loan lender will usually need you to agree that it can take your repayments from your bank account through your bank debit card. This is called a Continuous Payment Authority (CPA).

 

Are there circumstances when you should consider a payday loan?

People often take out payday loans to meet emergency costs, such as car repairs or domestic expenses. Any situation where money is needed urgently but there is not enough in your bank account or savings.

However, if you are considering a payday loan there are some disadvantages to be aware of.

  • The interest rates on payday loans can be very high. This makes them a very expensive way to borrow money.
  • If you are late with a payment the lender will apply charges for this, which will make your payday loan even more expensive. It could also damage your credit score.
  • If you do not have enough money in your bank account to meet a payment, the lender can use your CPA to ask your bank a second time for the money, without having to inform you first. This may cause you problems with your bank if there is not then enough money to make other planned payments.

So if you are considering taking out a payday loan, it may also be helpful to consider other alternatives.

 

Are there alternatives to payday loans?

The good news is yes. It is always worth looking at a number of different options to see which would be best for you.

If you do need to borrow money, there are other lenders who offer short term personal loans at a cheaper rate than payday loans and give you longer to repay the money. Many of these lenders, including Fair Finance, are direct lenders. This means that you deal directly with the lender: there is no “middle man” (eg broker or agent) involved.

You may be worried about applying for a personal loan because you have a poor credit history. But a fair lender, such as Fair Finance, will be willing to look at the bigger picture and not just your credit score.

At Fair Finance we are determined to give everyone a fair chance, so when you apply for a loan with us we treat each case on its merit. Our main priority is you, the customer. If we are confident that you can afford to make loan repayments - whatever your credit score - then we will consider lending to you. Because we are a direct lender we make our own lending decisions and do not need to involve any third party in your loan application.

To apply for a loan with us, first of all use Fair Finance’s free loan calculator to work out how much you need to borrow, and over what period of time you could afford to make the repayments. Then simply apply online or call us on 020 8988 0627.

Our aim is to review your application and make a decision in no more than 24 hours or one working day. If your loan is approved, we will call you to discuss and agree the details of your loan and repayment plan with you and will then send you your loan contract to sign. Once you have done this, your money will be in your account the same day if you sign your contract before 1pm on a weekday; otherwise by noon the next working day.

We hope that this article has helped you to understand:

  • What is a payday loan?
  • Are there circumstances in which you should consider a payday loan?
  • Are there alternatives to payday loans?

Check back here soon for more financial and lifestyle tips from Fair Finance.

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