Pawnshops were a real boon for people with short term financial difficulties. All they had to do was take their watch or other valuable item into a pawnshop. The pawnbroker would give it a value (less than it was worth) and hand over some money. At the end of the specified period, the borrower could redeem the object by handing over some cash. Now the pawnshop concept has had a new lease on life. In the 21st century it's not objects but paycheques that are pawned. This is the era of the payday loan.
What Is A Payday Loan?
A payday loan is a loan that you get against expected earnings. It is a short term unsecured loan for a relatively small amount. Lenders lend sums of up to £800, then borrowers repay this in two weeks or a month. The amount borrowers can get depends on their earnings.
Qualifying for a payday loan is simple, even if you have a bad credit rating. All you need is to be a UK resident, over 18 and with a bank account. You also need to have been working for a few months. To get the loan you will need to show proof of identification and proof of earnings. Lenders want to see that your salary is being paid regularly into your bank account.
Who Needs A Payday Loan?
A payday loan is a good option for people needing some short term financial assistance. For example, if there is an unforeseen expense which you will be able to pay back within a pay period, a payday loan could be the right option for you. A payday loan is also a good option for people with a poor credit rating who might need a short term loan.
There are many lenders who offer payday loans. This is becoming a popular option for people who don't want to undergo a full credit check. Payday loans have no credit check and can be obtained quickly. Most people receive their money within 24 hours. Sometimes this is paid directly into borrowers' bank accounts.
Payback Time For Your Payday Loan
In order to get the money, borrowers have to agree to pay a fee. This is much higher than the annual percentage rate on credit cards. In fact, it may be equivalent to an APR of almost 300%. This sounds high, but may be manageable if the loan is repaid on time. Borrowers will not be able to take out another payday loan until this is done.
Lenders will not hang around waiting for money if people don't pay. Borrowers may be able to extend the repayment period, for an extra fee, but if they default, debt collectors will be called in. This could permanently damage borrowers' credit rating.
The key to success with a payday loan is to borrow only what you need to and repay it on time. If you find yourself in a cycle of getting payday loan after payday loan, it may be time to consider other options for financial management.
Joseph Kenny writes for the UK Personal Loans Store, with more UK loan information or FinanceFool.co.uk many offers on personal loans. |
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