How Payday Loans Work?

Discover How Payday Loans Work?

If you’re considering taking out a payday loan, it’s important to know what you’re applying for. Understanding how payday loans work is the best way of making the right choice.

What are Payday Loans?

It is a loan designed to be taken out over a short period of time. Typically they are advertised as a means to fund unexpected purchases that arise a few days before the end of the month, when you are strapped for cash and waiting for payday.

How much can you borrow?

Typically up to £1,000, although some lenders may offer loans at higher amounts of maybe £1,500 or even £2,000. Loan periods start at a week and in some cases run-up to 6 to 12 months.

What does the application process involve?

Applying for most payday loans is usually a relatively simple process. Often, borrowers can apply online without having to speak to another human being.

When you apply you’ll need to provide bank details and information about income and expenditure, as well as your personal details. The vast majority of regulated lenders provide an easy to use online calculator. These tools estimate the overall cost of your loan and how much you’ll pay back in each instalment.

Does it have high interest?

When looking at how payday loans work, it is important to understand they are high-interest credit options that are not intended for long-term or repeated use. You’ll pay interest by the day on the money that you’ve borrowed. Some providers charge fees for late repayment. Many responsible lenders have removed these from their agreements. Remember that unexpected costs can arise at any time. Always look ahead and think not just about whether you’ll have the money available.