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All you need to know before getting a payday loan online

Imagine you’re in a tight fix, say, your boiler unexpectedly spoiled, and the repair had you wiped out. You’ve already maxed your credit card for the month. No savings to dip your hands into or an emergency fund to fall back on. Your rent is due in five days while your pay check doesn’t get paid for 12 more days. You need cash – fast.

One option you can take to raise the money for your rent is to take out a payday loan.

  • A payday loan is a short term, unsecured loan you can take out with the expectation to repay with your next pay check.
  • You can use Payday loan online services to get fast cash to handle emergencies and unexpected expenses.
  • Use short term loan comparison websites like to discover deals from lenders.

What is a payday loan?

A payday loan is essentially a short term, unsecured loan you take out against your next pay check.

Think of it as a cash advancement which you pay back once your pay check comes in. As a short-term loan, you repay the debt within a couple of weeks, usually not more than four weeks.

The loan amount is typically small, usually not more than £500-£1000 depending on the lender and is based on your take-home pay. A payday loan is intended to provide emergency cash to tide you till the next pay check drops. However, the annualized interest rates on these types of loans are often high. You’ll find some lenders charge up to 400 per cent of the initial loan amount.

How does a payday loan work?

The payday loan application is simple, fast, and straightforward. You don’t need to sign a ton of paperwork, nor your creditworthiness scrutinized before your application is approved.

Here are the typical steps to get a payday loan:

Step 1: Go to a payday loan lender’s website to complete their payday loan online application.

Step 2: Prove you’re employed and expecting a pay check.

Step 3: Fill out and sign a loan agreement form.

Step 4: Provide a verified bank account detail.

Step 5: Get credited immediately or within 24 hours directly into the verified bank account once your loan application is approved.

As you can see, the loan application process is simple. Which means you don’t have to worry about a long, tedious process to get your loan approved.

How is payday loan different from other loans?

First, the product, a payday loan is offered by payday lenders, financial companies that advance cash to customers without asking for collaterals.

Second, you can take out a payday loan regardless of your credit card score. Whether you have bad credit ratings or no credit ratings at all payday lenders can still advance you some cash.

The loan amount is usually small compared to other types of loans. You can request a cash advance for as little as £100. Though, the maximum amount is capped at £1000 for most lenders. Interests on Payday loans are much higher than for most other types of credits. Hence, the faster you pay off the loan, the less you will have to pay back.

That said, what’s the eligibility requirement for a Payday loan?

Eligibility for a cash advance is usually set by the lender; though in the UK they are regulated by the Financial Conduct Authority. So, you may want to check each lender’s requirements to be sure you qualify before applying.

Note that these criteria are set by the lenders to ensure you’re able to repay the loan. And, also as a form of responsible lending best practices put in place to protect you from ruining yourself financially.

These requirements are not set to discriminate or exclude you from getting the loan. But to protect those individuals who cannot afford to pay back the loan and are at risk of financial difficulties.

Here are some of the general requirements you must fulfil to qualify for a Payday loan:

  • Must be 18 and above – Lenders expect you to be at least 18. This way, they are sure you’re fully informed and able to take responsibility for your financial position. But, regardless of your age, whether 18 or 50, you can apply for and get approved for a quick cash advance.
  • Must be employed – You must convince lenders that you’re in full or part-time employment. A salary stub and or your salary account details are usually sufficient to pass this requirement. Many creditors require you to work minimum 16 hours a week, while others require specific amounts of monthly income.
  • UK resident only – lenders need to verify your address and identity. In the UK, a quick way to check whether you’re a resident is using the electoral roll. Some banks require you to be a UK citizen. If you’re a registered voter, it makes the process much easier and improves your chances of getting the loan.
  • UK verified bank account – you need a verified UK bank account to receive the cash.
  • Mobile number and email – During the application process, you’ll be asked to provide an active mobile number and email. The contacts are used to verify your information; plus, to keep in touch with you throughout your loan term.

If you meet all the requirements above, you can go ahead to apply for a Payday loan.

However, it is essential to keep in mind that satisfying all requirements doesn’t necessarily mean you’d get approved for the loan. It merely means your application can now be considered. As mentioned, many banks also require additional verification. The process involves checking your credit file and conducting an affordability assessment to be sure you can afford to repay the loan when approved.

Most customers, after getting approved for a Payday loan, soon find out they still need to apply for additional credits. Now, the question is:

Is it possible to apply for another Payday loan after getting approved for one?

For most lenders, there’s no limit to how many times you can apply for a Payday loan as long as you have passed their credit check. However, you’ll be required to provide accurate information about your existing loans. Another important thing you need to know when applying for a Payday loan is how much it costs in money terms.

How much does it cost to take a Payday loan?

Payday loans matter of fact are expensive. Even though, in the UK, the amount you get to repay is capped to prevent you from paying more than double the amount borrowed – things can quickly spiral out of hand.

According to the Financial Conduct Authority (FCA), someone taking out a Payday loan for a 30 days term and can pay back on time does not have to pay more than £24 in fees and interest per £100 borrowed.

So, if you’re taking out a loan of £260, for a 30-day repayment period, you will not have to pay more than £60 in charges and interest.

The FCA rules also set a cap on the default charges. The body, fixed default fees at no more than £15 for those struggling to pay back the loan. Also, interest on unpaid balances and default fees must not exceed the initial rate.

How to find the cheapest Payday loans

Each Payday loan lender calculates how much to charge you differently. Thankfully, there are several online payday loan comparison sites you can use to compare deals from different providers.

Though, at the centre of the calculations for each lender are two terms you should familiarise yourself with: interest rates and annual percentage rate (APR).

Interest rates are the extra cash you pay in addition to the initial total loan money. In the UK, the FCA capped the interest at 0.8% of the amount borrowed per day. For example, if you borrowed say £300 for 30-days, you can expect to pay £2.40 in interest every day till the loan is repaid.

APR, on the other hand, is the total interest you would have paid in a year. It calculates the cost of borrowing money for 12 months — a term, significantly longer than Payday, which is typically 30 days. APR is developed to calculate interest rates for but to get a clear picture of how much you’d pay for a loan, look at the ‘total payable cost.’ It is precise, accurate and provides you with the actual cost of the loan.

Are there risks involved in taking a Payday loan?

As with every other credit facility, you’re advised to conduct your due diligence and be sure you are well-informed about the particular loan you are applying for before signing the dotted lines.

That said, Payday loans, just like other short-term loans, have high-interest rates and short repayment terms. Hence, be sure you can repay the loan before applying.

Here are some advantages of a Payday loan:

  • Payday loans are a fast, hassle-free way to get cash when you’re caught short before the next pay check arrives.
  • You don’t have to queue in the bank hall when applying for the loan.
  • No lengthy, tedious paperwork to complete.
  • You get instant feedback on your loan application status usually within the same day.

Finally, applying for a quick loan is a pretty fast way to get cash to tide you over, sort an emergency even if you have bad credit or no credit rating at all.

Written by:
Emil Kjær

Emil Kjær

Emil uses his expertise to make a difference in the financial sector. He studied at the University of Southern Denmark and has been General Manager at Intelligent Banker since 2013, where he has helped more than 500,000 users from all over the world with their financial needs.

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