Top 5 Crucial Things to Consider When Applying for a Payday Loan
There you are, in dire need of cash, yet your next paycheck won’t arrive in a week or two. Getting a fast loan from a friend or family member is always the first thing that comes to mind that can remedy the cash situation.
However, there are times when even those close to you are short on cash and can’t help you.
The next best thing for finding cash fast is a payday loan.
Everyone over 18 in the UK with a bank account, has a low credit score, and is employed can get a payday loan. The application process is quite fast as they only need time to review your application. When an application is approved, you can have your money on your account in 24 hours, or often sooner than that.
However, even you need your cash urgently; you need to take a breather and consider a few things before applying for a loan. Considering these five crucial things, you would be doing yourself a huge favor and not regret things later.
1. Payday loans are to be used only when you have no other option.
The thing with payday loans is that their interest rates are one of the highest in the industry, if not the highest. Therefore, it doesn’t make any economic or financial sense to use these loans every month.
2. Take your time with the terms and conditions.
Payday loan lenders in the UK are controlled and regulated by the Financial Conduct Authority (FCA). However, they also have their terms and conditions added to the contracts they offer to their clients.
Read them carefully before putting your signature there and make sure that there isn’t some clause added that can later cost you a lot of money.
3. Understand the risks
The next step is to take a moment and consider all the things that can affect your ability to pay out your payday loan. What if some other expense occurs or you need more cash to cover the original expense?
The truth is, it won’t be the end of the world if you postpone the payment of your payday loan. Usually, that will mean paying penalties, and your loan will grow even bigger, but sometimes there is no other way around.
In any case, it is all about being aware of things like that.
4. Borrow only from a regulated credit provider
Regulated credit providers have a limit to how much they can charge you for their loans, and there is even a cap on their interest rates. On the other hand, those that work away from FCA’s umbrella can get away with anything. We all remember headlines such as “The Payday Loan Borrower That Charged 16,684,963.4%” or “Payday Lenders pushing homeless teenagers into debt.”
Also, keep in mind that if you find a payday loan lender that is not regulated by the FCA, their work is illegal. By borrowing them from them, your actions might be perceived as against the law as well.
5. Understand how your payday loan affects your credit rating
Whenever you take a payday loan, there is a trace of it on your credit score. Then there is the fact that some bankers don’t like to see too many payday loans on your credit score sheet, even though you’ve paid every one of them in full and on time. Because of that, please don’t make a habit of payday loans, but use them only in urgent situations when cash is in dire need.