Instant payday loans can be a lifeline for anyone who finds himself or herself short of money and has an emergency payout to make. More often than not, the unexpected happens halfway through your pay period when money is just becoming tight and you are eagerly waiting for payday. This is just life. This is when a payday loan can come in very handy.
How Does The Payday Loan Work?
The payday loan works as its name suggests. A loan is taken out to tide someone over until his or her next payday. This is not a huge loan of many hundreds of pounds; instead, lenders offer a sum of money generally between £100 and up to £1,000. The amount offered depends on the provider of the loan.
The amount borrowed is repaid back over the short-term, between one and three paydays and is repaid by direct debit on the dates agreed. The total amount of the loan is paid back, along with any interest that the loan accumulated.
One of the many benefits to the payday loan is that no guarantor is needed to borrow, even if you have a poor credit rating. This is due to the fact that you are not borrowing a large sum of money and you will be paying it back within one or two paydays. If you need to borrow a larger sum of money and you have a poor credit rating you might be better off applying for a guarantor loan.
Is a Payday Loan an Expensive Way of Borrowing?
In the past, there has been a great deal of bad press regarding payday loans and the fact that they are an expensive way of borrowing. This is generally because the APR looks to be extremely high, and it would be if you were repaying the loan over the year.
What is important to bear in mind is that the loan is only taken out for one to three months so you are not paying interest over the year. The interest will be calculated on a day-by-day basis on the payday loan. This means the earlier you can repay the loan the less interest you will pay on the loan.
Payday loans generally do not have an early repayment fee, so the quicker you pay it back, the less interest you pay. A payday loan can work in the way it is intended, providing you stick to the repayment plan and pay off the loan on time and in full.
When Might A Payday Loan Be Suitable?
A payday loan may be suitable for a wide range of circumstances providing it can be repaid on the agreed dates and is not spread out over the long term. Loans of this nature should only be thought of as being loans to be used in emergencies due to the fact that they generally have a higher rate of interest than other loans. They are not loans to be taken out for long-term borrowing. If you require a long term loan take a look at a short term loan, guarantor loan or personal loan.
However, when they are taken out in the correct circumstances they can work as they are designed to work. To provide a small cash sum of money in an emergency that can be repaid back over a one to three month period. There are many reasons why you might need to get hold of money quickly and here are just three of those reasons.
You Forgot to Pay That Large Electricity or Gas Bill
You are eagerly waiting for payday to come around at the end of the month and suddenly the last reminder for a huge electricity bill that you forgot to pay drops through the door.
You have just days to pay it and this falls well before your next payday arrives. In this case, you could bury your head in the ground and hope that it goes away, which it will not of course, or pay it using an instant payday loan.
By paying the bill you get in the good books with your electricity supplier and are not at risk of being cut off and then having to pay to have the electricity turned back on when you can pay the bill.
You Have Gone Into Unauthorised Overdraft
You have might have gone out shopping and overspent. You then check your bank statement and realise you have gone into unauthorised overdraft.
If your payday is still a long way off you might be looking at paying fees of up to £6 per day on the unauthorised overdraft. This soon adds up and over a month you could be left having to pay £80 per month in fees.
A payday loan could be a means of getting out of your unauthorised overdraft to stop the huge fees from building up. While the interest rates on payday loans are generally thought to be high and this loan may be one of the more expensive types of loans, it is not as expensive as the fee charged by the bank.
Your Car Gives Up On You and It Needs Repairing
You rely on your car for travelling to and from work each day but it has developed a fault and needs taking to the garage to be repaired. However, your payday is still weeks away and you do not have enough money in the bank to cover the repairs. In this instance, you could apply for an instant payday loan and get your hands on money within just a few hours.
You could have your car taken to the garage and let them repair it, then pay them using a payday loan and spread the cost over one to three paydays, depending on the amount borrowed.
The alternative means you will have to use public transport until your next payday and then have the car repaired. However, public transport is not cheap and it could end up costing you more than what you would have had to pay in interest on a payday loan. You will also be inconvenienced, as you will have to leave earlier to work if you are travelling on the bus or train and you will arrive home later as you have to rely on public transport, which is not the most reliable in the world in the UK.
How to Apply For Instant Payday Loans
You can go about applying for an instant payday loan in two ways. The first approach is to make a search online and hope that you get approval the first time you apply. If not you will have to go on searching for lenders and re-applying and this can affect your credit file. Every time you submit an application for credit it affects your credit rating, so a continual circle of applying, being turned down, applying again, only goes towards worsening your credit.
The second, and perhaps easiest way, to obtain a payday loan is to give Bonsai Finance your details. We can help to match you up with a payday loan lender. All you have to do is provide us with some details about your circumstances. These include:
- Your age;
- Your bank account details;
- Details about your income;
- Details about your outgoings.
The lenders we work with will make a credit check, but this may only be a soft credit check. This means they do not look too deep into your credit file. Lenders consider your present circumstances when deciding whether or not to offer you a payday loan, more than your past credit rating.
Can I Get A Payday Loan If My Credit Rating Is Poor?
Payday loans are one type of loan that people with a poor credit rating might be in a position to apply for. This is due to the fact that there is less risk to the lender than with other loans as the amount borrowed is relatively low and the loan is repaid back fast.
As loans are taken over the short-term they can help to improve a credit rating. This is because you can borrow a small sum of money and by repaying it on time you show lenders that you are reliable. Of course, it could also work against you if you fail to repay the loan back on the days agreed.
A Short Term Loan May Also Be Suitable
Payday loans are just one of two short term loan types that you might give consideration to if you need to get hold of money fast. The other type of fast loan is the short term loan. The short term loan also allows you to borrow a small sum and repay it back quickly. However, you can borrow more than what the payday loan would allow and spread the cost out over a slightly longer term, perhaps for up to one year.
Here at Bonsai Finance, we work with a panel of lenders who offer competitive rates and affordable loans options. The lenders we work with offer instant payday loans with money that can be paid into the bank often within hours. If you find yourself short of cash for one reason or another and can afford to repay the loan within one or two paydays, an instant loan may be the answer.