Payday loans are short-term loans that take care of an individual’s cash crunch during difficult times. While they are easy to get, the interest rates associated with these loans are high. But in recent times where survival has become a lot tough, courtesy of COVID-19, more and more individuals in the United Kingdom are considering taking payday loans to meet up with their daily requirements. Payday loans are considered the last resort when looking to borrow money. Nevertheless, a payday loan can help you stay afloat financially if you have recently lost your job or your company has put you under furlough.
But, before you take a payday loan, you should try to learn as much as possible about how payday loans work, how to get one, and what will happen once you get one. Since they are easily available from numerous internet sites and high-street shops in the UK, it is common to feel overwhelmed regarding which one to choose.
To help you out, we have created a thorough guide where we will be discussing everything you need to know about payday loans, including how they work.
Let’s jump right into it.
What is a Payday Loan and How it Works?
A payday loan works on the assumption that you are in a desperate need of quick cash, which you will have to repay on your next payday. In drastic times, when you have no other option, payday loans come in handy. On the face of it, a payday loan works the same as any other loan. You will visit a financial institution or a website, complete the loan application, and if the lender approves it, the money will be disbursed into your account. However, that’s where the similarities end.
In case of a payday loan in the UK, you will have to repay the loan quickly, essentially within 30 days or your next payday. In other words, once the customer receives their salaries, they use it to repay the payday loan in full. Usually, the loan amount is lower, and the amount ranges around your monthly wage. But, you can also take a larger sum if it is that urgent. However, please note that taking up a huge payday loan can trap you in a cycle of debt. So, it is important to do your research and due diligence before finalising a lender, shop around to get the best deals at the cheapest fee, here is a good review of the best UK payday lenders.
If it is a large amount, loan repayment in a single instalment could inevitably leave you struggling the following month. In some cases, people take up another payday loan to manage their expenses. So, shop around to find the best deals.
Payday loans are very short term loans that are repayable within 1-2 months.
Why are Payday Loans So Popular in the UK?
The primary reason why payday loans are so popular is that they are often quick. This type of loan is approved the same day, and the money is disbursed in your account within the first couple of hours after approval. As compared to other loan types, which may take weeks or months to get approved, payday loans offer an easy and fast solution in the events of an emergency.
The lenders are also keen to help people with loans in this current situation where people have lost their jobs, the economy is down, and there is no clear picture of what our future will be like. With that being said, your lender might agree to pause or reduce your payments temporarily.
What if I cannot repay my payday loan because of COVID-19?
You can get help if COVID-19 has made it difficult for you to repay the payday loan, or pay for something you bought on loan like furniture, home appliances, car, etc.
You might be able to get your instalments paused or reduced. Also, you might be able to stop the repossession of something you bought on finance.
You can contact Credit Union if you cannot repay the loan. They will help you deal with your delayed repayments by:
- Helping you work out a repayment plan to pay what you have borrowed
- Halting the addition of interest rate on loan for a limited time period
- Pausing or reducing your payments for a limited time
Things to Consider Before Taking a Payday Loan
There are several factors you should consider before you take up the payday loan. If you want to make a smart purchase, then the following are the best practices you need to follow:
- Shop around for the best deal and ensure to compare the deals with one another
- Determine whether the lender provide insight into the loan you are taking, like its features and benefits
- Determine what’s the procedure for late repayment if you are somehow not able to repay the loan on time
Final Words
Payday loans are turning out to be the go-to financial aid that people are taking in the midst of the pandemic. Only shop from a trusted lender and read the terms and conditions of the loan before signing the agreement with the lender.
