Explanation of a Payday Loan
A payday loan is a term that strikes fear into many people due to the reputation that the industry had in the previous decade or more. Here, we look to break down the stigma and the misunderstandings surrounding payday loans, and how the modern breed of responsible payday loan companies can be of genuine benefit to those people in a short-term financial bind.
There are countless reasons why a person might seek to apply for a payday loan. These include:
- An emergency breakdown of your car
- White goods appliances broken in the home
- Unexpected large tax bill
- Large utilities bill that must be paid immediately
There are many more reasons why someone might apply for a payday loan, but in most cases it is to cover an emergency situation at a time where there is very little money left over from the applicant’s previous payday, and the next payday is slightly too far away to wait for. It can cause stress and anxiety for those stuck in the financial situation, and it is therefore encouraging to know that there is help out there in the form of a loan from a responsible payday loan lender.
How Much Should a Payday Loan Be For?
A payday loan in its very nature is designed to be delivered over a very short period of time. This could be as little as £50 and up to around £1,000, depending on the Payday Loan Company you choose to apply through. For the vast majority of people, a payday loan is needed to cover the cost of items and emergencies that just can’t be covered right now, but that could be when payday arrives in a few days or weeks.
How Long Should a Payday Loan Take to Pay Off?
A payday loan is to be paid off in one full payment, within a month of taking out the loan initially. If an applicant wishes to take out a loan for a longer period of time, they can apply for a short-term loan in the form of an instalment loan.
How Much Interest Will I Pay?
This figure should be transparent during the application process and you should never be left in the dark as to how much interest you will pay on top of the initial payday loan amount. If you take out a payday loan and repay the full amount and interest in one go you will pay less interest than if you pay back an instalment loan over several months. The difference is that with an instalment loan you are likely to have lower monthly payments, but the overall total will be higher due to the higher interest attached to a longer repayment period.
Whatever you choose to do, pick a responsible lender, a payday loan provider that allows you flexibility of repayments, and has a clear application process that displays clarity in terms of the amount of interest you will be expected to pay back under the agreed repayment terms.