Often known by a variety of names a payday lender is an entity that advances instant payday loans to consumers. When things in life don't go as planned, a financial emergency can affect almost anyone. But what if your next payday is too far away to cover any unexpected costs? This is where payday lenders not brokers may be able to help especially if you have a bad credit rating. When looking to borrow the first port of call is the internet to compare direct payday lenders. A quick search on the internet for terms like "best payday loans UK" or "payday loans direct lenders" reveals a long list of lenders and it can be difficult to figure out what to look for in a lender when trying to make an informed decision.
The initial question to ask should be whether a payday loan is the right type of loan for your specific needs. Payday loans may be a convenient form of finance but they are not an instant fix. There are loans which are more appropriate for longer-term financial needs and are generally more affordable if you want to borrow over a longer period. However, these longer-term loans are typically for a larger loan amount and therefore may not be what you are looking for. Therefore, it really depends on your individual circumstances and needs as to which form of credit is more suitable for your needs.
Payday loans are a form of high cost short term credit (HCSTC). They should not be seen as a solution to long-term financial borrowing, but instead as short-term support during a financial emergency. For this reason, with most direct payday lenders you will need to repay your loan within one pay cycle. There are some lenders, however, who offer longer repayment periods.
Two channels are available to apply for a payday loan. You can either go through a broker (essentially a third party which will direct you towards a specific lender) or apply directly to one of the many payday lenders available. When applying through a broker, the details of your application may be sent to multiple payday lenders. If you decide to directly apply, make sure to pay attention to certain characteristics of a lender before applying:
Any company that requires sensitive information about your person or your finances to be provided should be safe and trustworthy, so be sure to confirm the lender you are planning to apply has the appropriate permissions. This should be stated on the lender's website. Payday lenders have to be authorised by the Financial Conduct Authority (FCA) and you can find a list of approved lenders on the FCA website.
Different lenders will have different fees and interest rates, so make sure to compare these and find the best fit for your needs. At 247Moneybox.com, for example, interest is charged daily at 0.8% of the amount you borrowed. If repayment of your loan is late, an additional one-time fee of £15 will be charged. You will never be charged more than double of what you were funded. This rule is in line with FCA regulations and applies to all direct payday lenders. Before applying for a payday loan, you need to carefully consider whether you will be able to repay what you have borrowed, as missed or late repayments can lead to serious financial difficulties.
It is important to think about your future, even in emergency situations. The application process for a payday loan entails a credit check. This will appear as a search mark on your credit file but will not affect your credit rating. Be aware that payday lenders report to Credit Reference Agencies (CRAs), therefore late repayments could have a negative impact on your future ability to access loans as other lenders may base their decisions to lend you money on credit reports and your credit rating.
There are some risks you should be aware of before taking out a payday loan. As mentioned above, failure to repay on time can potentially have a negative impact on your credit rating. Furthermore, to collect outstanding debt, a debt collection agency may take over. Apart from that, if Direct Debit fails you may have to pay a fee to your bank, independently from the lender.
If you decide to go ahead with a payday loan application, you will have to provide some information to the broker or lender. With most payday lenders, the base criteria for being eligible to take out a loan are that you are aged 18 over, live in the UK, are employed with a regular income and have a UK bank account. While the majority of payday lenders are available online, a number of lenders can be found in high-street stores. The route you decide to take depends on your preference of whether you want to talk to someone face to face when setting up your loan or if you want to take advantage of the convenience offered by an online application.
During the application process, you will need to disclose personal information about yourself (e.g. name, address, phone number, date of birth, income, employment, bank account and card details). As a responsible lender, we carry out credit, ID, and employment checks with the information you provide, in order to come to a responsible lending decision.
The size of the loan you will be able to receive varies between lenders. Typically, first-time customers can borrow a smaller amount to begin with. Returning customers who have demonstrated responsible borrowing may qualify to borrow higher amounts subject to appropriate checks, depending on the individual lender. Decisions about who we lend to and how much are made in a way that ensures you will be able to repay what you have borrowed without putting you in financial difficulty. In any case, should you decide after applying that you do not want the loan after all, there is a cooling-off period of 14 days in which you are able to withdraw from the loan agreement. In such cases you would only have to repay the amount borrowed and interest for the period since you took out the loan.