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The Facts On Payday Loans UK

Payday loans UK give a person who is slightly short of money in a particular month the ability to get a quick cash loan, which will be paid back on or shortly after his or her next pay day.

These types of loans can be extremely useful in specific situations: Most often when a person has urgent bills to pay, but also if their car breaks down and needs fixing quickly or even when he or she has simply over-spent and needs grocery money. In general, they are useful as a short-term money solution, and are not intended to be used for more than one to two months.

Each pay day loan company has different prerequisites on who can apply to take a loan. However, most of the main payday loans UK companies will consider a loan for somebody over the age of eighteen who has a regular, monthly income. Some will even consider loaning money to students who can prove that they have an imminent student loan payment soon to be deposited into their bank account.

When applying for a loan, the applicant will be credit checked; this is standard practise and is used to check that the applicant does not have significant debt against their name and is likely to pay the money back. It should be noted that, even if an applicant does not have a particularly good credit rating, some pay day loan companies will still consider loaning to them. This is usually on the condition that the (potential) customer proves their full-time employment status by submitting several months' bank statements and/or pay slips by fax or email to the company.

The interest rate on these types of loans is very high - in fact the majority advertise rates of over 2000% APR. Although this is a very high interest rate, it needs to be looked at in perspective: These loans are intended to be used for, at most, one to two months. This means that, instead of looking at the APR, it is more useful to look at how much it will cost each month. The industry standard rate is around 25 GBP per 100 GBP borrowed. This means that if one were to borrow 200 GBP, they would need to pay back 250 GBP on their next pay day.

Many payday loans UK companies work on a "trust" based system, which means that a customer who borrows money and then pays it back on time, as promised, will be given a higher level of trust. This is useful for people who need a loan again in the future because the company will instill more trust into the customer and generally offer them a higher value loan.

The disadvantage to the trust system, of course, is that the higher amount they offer is based upon previous payment history, rather than the amount to customer earns. This means that there is potential for the customer to borrow more than they can afford to pay back.

These types of loans are not for everyone; however, in specific circumstances, payday loans UK can help people on a short-term basis.

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