Myths about Payday Loans. Revealed
Posted: Sep 06, 2018
We face financial crisis and issues every day in our life. Some of us get out of it easily and some of us are not able to due to numerous reasons. Financial crisis can enter your life anytime without any warning or sign. Each one of us needs a financial helping hand, be it a regular salary earner or someone who is into freelancing. At some point of time in life, the expenses become inevitable and unavoidable. To get out of situations like these, lenders are ready to provide short-term unsecured loans. A Payday Loan is specially designed to bridge the gap between paychecks. Some brokers and lenders are also offering self-employed payday loan, quick payday loans, 12 months’ payday loans, 3 months’ payday loans, instant payday loans for students, payday loans with brokers who charge no fees, etc.,
This blog will be useful for people who are looking for payday loans. And this might be able to answer all things associated with a payday loan.
What is a Payday Loan?
A typical payday loan is given for small amounts for a shorter period of time. A registered broker or lender will always prefer an assessment of an individual’s credit history prior to the approval of the loan. These payday loans are generally repaid on the receipt of next paycheck. Also known as a deferred presentment, cash advance, credit access business, deferred deposit, small-dollar loan, salary loan, payday advance, payroll loan, etc.,
The myth: Payday loans are generally borrowed for 1 month.
Revelation: As the name suggests payday loans are generally given a month so that the borrower can repay the amount when they receive their paycheck. But apart from this 1-month payday loan, these short-term loans in the UK also offers 3-month payday loans, quick payday loans, payday loans for self-employed people, instant payday loan, and 12 months payday loans.
The Myth: A very small amount is given in Payday Loans in the U.K.
Revelation: The amount of loan depends on the state laws. The financial regulatory firm in the U.K. that is FCA has certain rules and regulations for loans. These laws are very stringent in their nature, hence, the limit decided by this firm is to lower down the risk on any individual who is opting for short-term loans of getting hit by a bad or poor credit history.
How does a Payday Loan Work?
Today you woke up in every good mood and you left home early for office. All set to work you grab a grande iced coffee with cream from the nearest Starbucks and you start to drive. Suddenly, on the way, the car breaks down and you do not have much left in your account. The amount can save you for the current month but how would you deal with the other expenses that follow? Instant and quick payday loans will be your savior here.
The Myth: Application and loan approval process is quite lengthy and mind-numbing.
Revelation: If you are applying for any short-term loans the process is quite easy and smooth. Every process is carried out online. An instant decision is made and showed to you instantly. And once approved, the funds are transferred to your account immediately without further delay. All you need is internet access and a laptop, forget standing in long queues for hours for a loan approval.
The Myth: Post-dated cheques for repayment are usually set for 14 days.
Revelation: Not necessarily. An individual who is borrowing a payday loan from a registered broker will be given an option to choose the repayment slot out of the available list. This piece of information is filled during the process of filling out the online application form. The option may vary from broker to broker. When that period ends, the lender encashes the cheque and a part of your loan or complete amount of loan has been repaid to the lender.
Who uses these types of Payday Loans? How is it beneficial?
As per a recent report, it is observed that 4 out of 5 customers opt for payday loans in an year £100 is the single most common borrowed amount in the U.K. The report also suggests that people aged between 25-30 years old who are paying rent every month for their accommodation and their income is under £1,500 per month are more likely to choose a payday loan to make ends meet. The Competition and Markets Authority (CMA) had conducted a research which showed that the average size of a payday loan is £260. Payday loans are gaining popularity rapidly as payday loans for bad credit is the most demanded type of loan.
The Myth: Only people who are earning a regular salary are given a payday loan instantly.
Revelation: No. Such is not the case. Let's get to the nitty-gritty of this scenario. Many reports and studies show that payday loans are generally opted by:
- Individuals with low-income or poor income
- Individuals living in rental accommodation, council tenants or housing associations
- Unemployed but seeking unemployment
- Unmarried Individuals or dependent individuals
The Myth: Loans are never quick and easy.
Revelation: Quick and instant payday loans are quick and easy because these are designed specifically to allow cash flow during liquidity crunch or cash-strapped situations. A short-term payday loan is the best option for people who do not possess a credit card or for people who do not have much savings. These loans are really helpful for any temporary and financial need. Also, these loans are easy and accessible by people with bad credit or no credit history at all.
What are the disadvantages of a Payday Loan?
Payday loans are considered to be high-cost short-term loan type. If there’s any chance that the borrower cannot repay the loan amount, then any loan should be avoided. Because once an individual has missed the repayment, they will be charged additional finance fee which increases the debt and impacts the credit history negatively. People who are already in debt are strongly recommended not to choose this payday loan as a debt consolidation because it might drag them deeper into a debt. Extreme caution and carefulness are needed while choosing this instant payday loan.
Are there any alternatives to a Payday Loan?
A payday loan is quite attractive and easy when you are trapped in a financial mess. But there are other recommended alternatives in the market to a payday loan.
Some of the alternatives are listed below:
- Use your credit card for a cash advance.
- Ask for an advance payment to your employer.
- Check with your friends, relatives or any acquaintance for a loan.
- Use your savings amount to get rid of the current situation.
- Opt for a personal loan.
- Consider credit counseling.
- You can rely on a Payday Alternative Loan (PAL).
How to keep yourself prepared for financial emergencies?
Emergencies are never predicted because they are not foreseeable. But saving a bit for the rainy days may help you get out of this mess. Try to increase what you are earning right now so that you will be able to save some more. Or else, possess a few credit cards which you can use for the emergency purpose. Another easy doing option is to try to cut your extra and unnecessary expenses as this might help you save 2 more additional pennies. Protect yourself with an insurance to avoid having your financial well-being overturned by unexpected events of emergencies.
At last, we would suggest you map out a contingency plan which may help you feel more protected and prepared for any financial emergency.
Hi, my name is Jully O'Neill. I live in London and I work as a financial writer at Oyster Loan. Click Here More Information https://www.oysterloan.co.uk/