What is a payday loan exactly

If you’re going through a financial emergency, a payday loan could ease your financial worries, giving you ample time to recover. Let’s find out what a payday loan is and how you can get a payday loan.

We have broken it all down for you. This article explains all you need to know about payday loans to help you make an informed decision before taking out a loan. We explain what a payday loan is, how to get one and the repayment terms.

What Is a Payday Loan?

A payday loan is a short-term unsecured financial loan that allows one to address financial problems. It is also referred to as a cash advance.

Payday loans come with lower credit requirements. And their approval rates are better than any traditional loans.

Can I Get a Payday Loan Online?

Yes, you can get a payday loan online, and it is very simple! Most of the lenders are making the entire borrowing process easier for applicants. All you need to do is to fill an online application, provide some financial details, and the lender will process your loan based on these inputs. In some cases, lenders process these loans within 24 hours of the initial application.

What Do You Need For to Apply for One?

There are certain criteria for you to be able to qualify for a payday loan in the UK. You must a British citizen, at least 18 years of age, have a steady source of income (employment or pension) and have a functional bank account.

Different lenders have different specific credit requirements. Make sure to choose a lender that is suitable for you. You can find lenders that consider payday loan bad credit cases, in case your credit score is low.

What Is APR?

The Annual Percentage Rate or APR of a payday loan is the average amount you will pay against your loan in a year. Unlike the interest rate, APR covers different fees or charges that you will incur during the borrowing period.

According to regulations, all firms must make sure that interest and fees charged don’t go over 0.8{f0e8a5747b3f6f0a3e805ccdcf12fd207b8140eca39945e269a3b41bdb6d1129} of the amount borrowed per day. Additionally, if borrowers default, then fees must not exceed £15, and borrowers must never pay more than 100{f0e8a5747b3f6f0a3e805ccdcf12fd207b8140eca39945e269a3b41bdb6d1129} of what they borrowed in interest rates and fees.

If you’re using a payday loan, make sure to understand the difference between representative APR (RAPR) and typical APR.

The representative APR is the rate that the lender offers to 51{f0e8a5747b3f6f0a3e805ccdcf12fd207b8140eca39945e269a3b41bdb6d1129} or more of its borrowers. A typical APR, on the other hand, is the rate that the lender offers to more than two-thirds of its borrowers. When applying for the loan, make sure you understand the difference between RAPR and actual APR. The actual APR is what you will be offered based on your details, and can be much higher, but also lower, than RAPR

What Are the Repayment Terms of a Payday Loan?

Payday loans come with flexible repayment terms. A typical payday loan comes with a repayment term of 3 months to 18 months or even 24 months in some cases.

It means you’ll have enough time to repay the loan. However, in case you’re late on a payment, be upfront about it and inform your lender at the earliest.

How Can I Use the Loan?

Payday loans are often used for emergencies. You can use it to pay for an urgent medical emergency, car repair, or to avoid a late bill payment, but it can be for anything else as well. However, it is not advised to use it for unnecessary purchases, luxuries, or frivolous spending.

Can I Get a Payday Loan With Bad Credit?

Payday loans are also available to people with a bad or average credit score. You can even find a payday loan bad credit lender. They’re more likely to process your loan within a reasonable timeline.

Most of the lenders perform a soft pull on your credit score, so it is not likely to affect your credit score.

How to Get a Payday Loan in 3 Steps

1. Firstly you will need to fill an Online Application

The first step in the process is to fill an online form for the payday loan.

It will require essential details such as the requested loan amount, your bank details, employment details or income details, and suitable repayment term.

You can call customer care in case of any doubts.

2. Then you will need to wait for the Lender to Process Your Application

Depending on the lender, your application will take between a couple of hours and 48 hours to get processed.

The lender will provide a timeline for the processing of your application. The lender will contact you after the processing or seek more documents if required.

3. Once it has been processes, you will receive Loan Amount in Your Bank Account

Once your application is processed, the lender will deposit the loan amount in your bank account. You can access these funds for any of your financial requirements.

3 Things to Consider When Taking a Payday Loan

1. Use the loans for financial emergencies only

Payday loans were designed to fill the gap between your paychecks. You should restrict their use to financial crises only. Payday loans come with high APRs, so it makes sense to use them for essentials only.

2. Choose your loan term well

Another important consideration is the term of a payday loan. Since payday loans have high APRs, it is best to repay them as soon as possible. You should do a thorough financial analysis and choose a term accordingly.

3. Make sure you pay on time

Much like any other loan, payday loans come with specific repayment schedules. A late payment or missed payment could attract additional penalties. It is crucial to make payments on time.

In case you are falling short, inform your lender and ask them to waive off the late payment fee or at least minimise the penalty.