Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
When you mention payday loans most people instantly have negative things to say about them. When asked why they say things like; “the interest rates are very high” or, “payday lenders rip people off”.
For a lot of people in the UK payday loans are sometimes the only way for them to get access to small amounts of cash relatively quickly.
The cost of borrowing may seem high with interest rates sometimes quoted around 1,200% APR. Since 2015 The Financial Conduct Authority placed caps on what direct lenders can charge for payday loans and other short-term loan products, this included the amount of interest that can be charged per day which at the moment is 0.8% per day which is the equivalent of 292%.
If you were to borrow £200 over 14 days at this rate means a you would pay back £222.40 and the headline representative APR is 1,509 per cent.
Once the lender factors in customer acquisition costs (£20-30 represents the ‘right ballpark’ according to one lender since the lender has to pay for credit checks that come in at around £15 to £20 ), overheads and defaults, the margins for the lender aren’t not as high as you might expect.
Banks do not provide loans for small amounts, so this created a market which was filled in the early days with providers like Wonga loans.
Most people who use payday loan services use them in the correct way and that is for emergency cash when they have no alternative, for example, it’s nearing payday and they have exhausted their funds and want to use their money for essentials like food etc and do not want to dip into their food budget to pay for a car repair or broken freezer.
Every payday lender emphasises how important it is that these types of loans are not to be used for loan term borrowing. If you do find yourself struggling to repay your debts, we would recommend seeking the advice of organisations such as the national debt help line and the like.
Having poor credit history can be a real problem when people struggle to get a small amount of cash to cover an emergency expense like an overdue bill. Lots of high street lenders will refuse to lend to people with bad credit.
People with bad credit are deemed to be too much of a risk when lending such small amounts of money when the margins for the lenders are so small.
All payday direct lenders will assess each application on its own merit and perform through credit checks. They must since they the lender can ill afford a loan going bad and someone not repaying.
Payday lenders are more experienced than any other type of lender in granting bad credit loans when people really need them.
If payday loan companies which are heavily regulated by The Financial Conduct Authority did not exist, then people in need may be forced to turn to unlicensed credit brokers.
Most payday lenders have a presence on-line which allows you to apply for your short-term loan with ease in minutes. Once you click the apply button the application could be processed in minutes. Although there are some occasions when the lender may ask you to provide additional documents for validation, security and affordability.
Although most of the time the details requested during the short application process are sufficient for the lender to offer you a loan.
Cashute does not retain, store or see any of your data. It is transmitted securely to the panel of lenders who will make the final decision.
When you have applied for a loan you will be given the option to manage your account on-line so that you can keep track of your finances and manage your repayments with ease.
The on-line loan account portal will show you your current balance, how much you have paid and what remains outstanding to be paid.
Managing your loan in this way makes it much easier if you wanted to repay more and reduce your loan amount when ever you like. This facility is made available by most lenders.
Making early repayments will reduce the amount which you have to repay over the term of the loan.
Emergencies will happen when you least expect them to. The usual suspects, the broken-down car or the boiler that has stopped working. You would think that they conspire together to stop work when you can least afford to pay for their repairs.
We could go down to the bank and get a personal loan but these traditional forms of lending take too much time to get approved when you need you car back on the road. Being able to apply for your payday loan and have in your bank within an hour can be a real life and time saver.
Although you decide what you want to spend the payday loan on, we would strongly suggest that you do not spend it on anything other than emergencies such as urgent bills which need paying and the like, we do not endorse spending it on a night out on the town. This sort of thing will lead to debts which will spiral out of control.
Use Payday loans and short-term loans for emergencies only
If you have other bills due, such as credit cards, overdrafts and the like it might be cheap and more affordable to take out a short-term loan to pay off all the credit card bills and settle the overdraft and have one single simple payment to make each month. This will allow you to focus on just the single short-term loan.
Borrowing £100 per month will not cost you more than £25 in interest. The Financial Conduct Authority in 2015 placed caps on the limit which direct lenders can charge for short term credit.
Also, worth nothing is that the FCA has put rules in place so that you will never pay back more than double what you borrowed.
Payday loans are for short periods of time, sometimes 3 months others 12 months. Unlike other forms of credit which could span over many years.
You can apply for a loan at any time, at 2am if you like. We have had applications for loans come in the middle of the night.
It is reassuring that our systems continue to function and provide a lifeline to those that need peace of mind so they can return to sleep knowing that in the morning they can settle those bills.
All responsible payday lenders are regulated by The Financial Conduct Authority. They keep a close eye on all companies that handle funds and deal with consumer credit.
All responsible lenders have had to go through rigorous application process to get their FCA licence and it is something they intend to keep.
So, with that in mind all lenders will make sure that they do not break the rules and abide by all the FCA regulations at all times.
We always recommend that before you borrow any money from any company to check that they are registered with the FCA.
As has already been stated, The FCA in 2015 stepped in and started to lay down rules as to what payday lenders can and cannot do.
One of the biggest changes to the industry was the daily interest rate cap that set the maximum rate of interest which could be charged on a loan per day is 0.8%. Of in other words if you borrowed £100 then you would repay 0.80p of interest per day or a maximum of £24 per month on top of the original principle amount.
Another rule was the limit on the total amount which could be paid back over the life of the loan. If you borrowed £100 you would never pay back more than £200, this is with interest and any fees.
While the FCA had tightened the screws on payday lenders the same cannot be said for overdrafts. The fees and interest on overdrafts can continue to add up if they are not repaid in full. Unauthorised overdrafts incur even more interest and charges than arranged ones which are expensive in most cases.
So despite what you may have heard in the media about payday loans being terrible evil spawn of the devil the picture they paint is not the reality since for the last 4 years payday lenders have to abide by very strict financial rules that are not demanded of from any other credit provider.
Debt management agencies are regulated by The Financial Conduct Authority
Many people in the U.K struggle with debts and many do not know how to start to repay them speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.
https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk
You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice