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Representative 277.5% APR Representative Example: Borrow £700 and pay £111.27 per month for 12 months at an interest rate of 140% per annum (fixed). The total charge for credit is £635.24 The total amount repayable is £1335.24. Representative 277.5% APR (variable). Your APR rate will be based on your circumstances.
Payday Loan Requirements
Financial emergencies come at the least opportune moments which is why many people turn to payday loans. While these quick cash services can help solve short-term problems, it may be difficult to deal with them in the long run as interest rates in the UK can get expensive.
For this very reason, financial experts warn consumers to make sure they have a good understanding of everything about the loans they are taking to avoid surprises in the future. With this, you should know the payday loan requirements.
Payday Loan Requirements Options
Because of the steadily rising demand for it, lending companies, as well as individual lenders, have come up with different payday loan options for consumers, each aimed to suit different people’s specific needs and circumstances. Understanding all your payday loan requirements options will help you decide on the best course to take.
Small Loans vs. Long-Term Loans
Small loans, like bank overdrafts and credit cards, are used to cover unexpected expenses with amounts varying between £100 and £1,000. In some companies, the minimum for small loans can be as low as £80 or as high as £200. People often turn to this kind of loan for medical emergencies or unexpected repairs. However, those who need to borrow money for a longer period and a bigger amount needed for car procurement or mortgage should opt for large loans or the so-called “long-term loans,” instead.
Poor Credit Payday Loans
Another kind of payday loan that has become popular in the UK is poor credit loans. As the name implies, this type of loan caters to those with bad credit reputation, provided that the person is not unemployed. However, this kind of loan often comes with massive interest rates because people taking it up are considered high-risk borrowers.
Instant Payday Loans
Instant payday loans are the quickest to obtain and are perfect for time-sensitive financial emergencies. This kind of loan is often offered online where borrowers fill-up forms before they receive the money in just minutes.
1-Hour Payday Loans
Another kind of quick and easy solution to your financial emergency is the 1-hour payday loan. As the name suggests, this kind of loan only takes one hour for approval and offers lower interest rates compared to instant payday loans. Since it is a quick approval loan, the contract is established via phone or email.
Same-Day Payday Loans
If your financial emergency can wait for a few hours, it is best to take up a same-day payday loan instead of the 1-hour or instant ones. This is because the money can still be received within the exact same day you sent your application and with a relatively lower interest rate.
Payday Loan Requirements
Companies offering different kinds of loans also require varying documents from borrowers, depending on the type of program they are signing up for. However, every single one would require disclosure of personal information that lenders use to verify the potential borrower’s paying capacity, his credit history, and eligibility to take up such a loan. Among the most common requirements for payday loans are:
- UK Citizenship – Lenders in the United Kingdom only offer loans to citizens living in the country to avoid complications during debt collection.
- Legal Age – Like in other countries, UK payday loan companies require borrowers to be of legal age of at least 18 years old as stated by law.
- Steady Income Source – A consistent source of income is a must when it comes to borrowers taking up loans. In fact, even bad credit payday loan companies require this as it is the only way they can be guaranteed that a borrower will be able to return their money. After all, a person cannot pay his loans without having a job.
- Minimum Monthly Income – Most lenders require a minimum monthly income of £1,000. This is because companies believe that it would be challenging for borrowers to pay their loans if their income is below this amount as a UK citizen often need to pay for recurring expenses like the tax, personal commodities, and mortgage or house maintenance.
- Company Tenure – Some lenders don’t approve loan applications if the borrower hasn’t been with his current company for at least 3 or 4 months.
- Checking Accounts – Several lenders also require borrowers to have a checking account.
In this modern age of technological advancements, applications are often done online. Some companies require borrowers to fill up online forms for short-term loans. Others even have an option where the information can be provided by secure phone line, an encrypted mobile app, or through chat with a live agent.
For small payday loan requirements, there is little paperwork needed so most of them use these quick methods. Other types of loans, like the no fax payday loan, do not require any documentary requirements to be faxed or mailed to the lending company on top of what borrowers have submitted online.
Payday Loans Repayment and Cost
Payday loans are considered as a temporary solution to help people get by before their next paycheck arrives. However, the current circumstances in the UK often deviate from this ideal situation as borrowers sometimes come late with their payments. Aside from that, the number of companies offering long-term payday loans are starting to gain momentum in the industry.
Generally, the interest and charges kick in during the end of the month. On the other hand, companies are starting to offer different kinds of repayment methods for consumers to choose from. Because of this, consumers are buried in debt. Fortunately, the Financial Conduct Authority (FCA) has set a debt cap to save borrowers from needing to pay double the amount they loaned for.
Basically, individuals with a loan set for 30 days will only pay a maximum of £24 in charges and fees for every £100 borrowed. If he cannot pay on time, default fees won’t exceed £15 on top of the interest added to the amount borrowed.
Dangers of Payday Loan Requirements
Every individual encounter a difficult part of life where his finances don’t add up. Be it due to an emergency hospitalization or unexpected home repairs, it goes without saying that most people use payday loans to cope with these misfortunes.
But while payday loans are high for coping with financial emergencies, but you need to be wary of the so-called “payday loans trap.” According to experts, this comes in the form of a loan rollover or deferral. This may be an extension of your current loan or something new which will be used to pay for your previous one.
While this may sound like a great way to solve your debt problem, it often sparks an even bigger one as it comes with a lot more interest fees and charges. Because of this, experts explained that there are certain situations where you should decline or, at least, think twice about applying for a payday loan, including:
- Borrowing more money to pay off other loans
- Having other unpaid loans
- Uncertainty in the consistency of your repayment
- Borrowing money for things you don’t need or cannot afford based on your current income
When you are already buried in a loan problem, you should consider getting expert financial advice to improve how you manage your money. In fact, these professionals, who often offer their services at no cost, can also negotiate with the lenders you owe money to so that you have more time in paying them back.
Things You Should Remember Before Signing On A Payday Loan Requirements
Taking up loans— be it, short-term or long-term— is a big decision to make which is why you should think it as thoroughly as possible. Here are some things you should think about first before signing a payday loan contract:
- Payday loans aren’t meant for long term.
- Loans are always accompanied by interest and other fees as it is the only way companies and individual lenders earn.
- Payday loans should be considered only when there is an emergency or sudden need for money, so make sure that you aren’t taking up a loan for luxuries and indulgences you cannot afford. Evaluate the situation first to know if that thing you want to buy or services you intend to get is worth taking up a loan for.
- Understand your financial situation first before taking up a loan as it will show you your capacity to pay regularly.
- Consider all the fees and charges to be added to the loan when computing for your capacity to pay.
- Know all your options. Ask close friends and family for help first before turning to strangers for financial help as it would often end up giving you more trouble than its worth.
- When computing for your capacity to pay, make sure you consider all your regular expenses including any mortgages, your budget food, clothing, and transportation as well as insurances and tax you need to pay. Doing so will prevent you from over-estimating your capacity to take on a loan, thereby saving you from a heap of trouble when you are faced with multitudes of fees in the future.