Even if you’ve spent hours carefully budgeting, it’s not always possible to predict what costs are hiding around the corner. Whether your MOT has revealed an unexpected problem with your car or your oven has packed up, “Payday” or short term loans are one way to cover the unexpected, temporary shortfall in cash. However, “high-cost short-term credit” is an expensive method of borrowing. Before you take a “payday” loan out, make sure you’ve considered alternative options such as those listed at moneyadviceservice.org.uk
Because this type of loan is not designed as a long term solution, smaller credit amounts and shorter repayment periods (than traditional bank loans) are the norm. They also feature much higher rates of interest. However if your application is accepted it is possible to have your loan transferred to you within a day.
Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk.
Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
Payday/short term loans are fast and expensive. They’re designed to cover unexpected, essential costs – perhaps repairing a broken laptop or calling out a plumber.
If you do decide to take out a short term/payday loan you must ensure that you can meet the repayment terms, and you should look to pay off your loan as soon as you can afford to. Missing repayments will not only result in fees but will damage your credit rating.
CPA differs from direct debit because they give the company being paid the ability to withdraw money from your account whenever they wish, and to take payments of different amounts without consulting you. Most payday loan companies will use CPA to collect your repayments, however you can cancel this at any point by either consulting with your provider or your bank.
To be illegible for a short term loan you’ll normally need to meet the following criteria:
Meeting these requirements does not guarantee you will be able to take out a £300 loan – only that your application will be considered.
Payday/short term loans are an expensive method of borrowing and should only be considered as a last resort. They may not solve your money problems, and aren’t a good idea for borrowing over longer periods.
Before you apply for a payday or short term loan, make sure you’ve considered other options. Is the expenditure that you’re planning absolutely essential? If you can defer a purchase then you could save yourself money in the long run. If you’re struggling to pay a bill, then why not talk to your electricity, gas, phone or water provider to see if you can work out a payment plan?
Read more about alternatives to payday loans at moneyadviceservice.org.uk.
Browse our collection of payday loan guides, designed to answer all of your short term loan questions and help you find the right payday loan.
What’s the difference between a continuous payment authority, a direct debit and a standing order?
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