Payday loans provide short-term financial assistance in a way that helps people get over certain stresses linked to money, tiding them over until their next pay day. If you are a person struggling with money you should first investigate all possible avenues of financial assistance before committing to signing up to a payday loan. Here, we take a look at the ins and outs of payday loans, what to expect if you are looking into taking out a short-term loan, and your responsibilities in terms of paying back a payday loan.
You may have seen in the news recently about big payday loan companies closing their doors for good, and news about one of the directors of QuickQuid maintaining a role within the industry watchdog organisation despite the lender going under. The entire industry has seemed like it is under threat at times, with dodgy dealings and a carelessness about many parts of the industry that has led to customers and everyday people suffering long-term financial complications as a direct result of the payday loans they have taken out.
This isn’t always the case, and there is a new breed of responsible lenders in the form of payday loan companies that have an easy process of application, and a clear, transparent approach to lending over a short period of time.
When you apply for a payday loan you are doing so because you are in need of cash really quickly. If successful, the money is transferred directly into your bank account (the best payday loan companies can guarantee this cash is transferred within 24 hours in most cases). You are then responsible in paying back the loan, and any interest, within the agreed timeframe.
There are options at this point. For a straight-up, simple payday loan, the idea is that you pay back the loan and interest within one-month (at the time of your next payday – hence the payday loans term). Alternatively, an instalment loan can be taken out over a slightly longer period – up to 6-months for most lenders – where you might choose to pay a lower amount each month with the knowledge that the overall interest rate will be higher over the entire period than if you make higher monthly payments and clear the debt over a shorter space of time.
Remember that with any type of financial service such as a payday loan, you have a 14-day cooling off period, where you have the legal right to withdraw from the agreement. Under these circumstances you are only obliged to pay any interest from the amount you have used up to that point.
The APR on payday and short-term loans is extremely high, with the idea that they are only ever designed to be taken out over a short period of time. The problem with payday loans in the past is that people have become stuck in a cycle of debt, where the interest piles up and it becomes harder and harder to pay out of the total debt. This is why it is so important to find a responsible lender when searching for a payday loan.