What is a Payday Loan?

Written by admin on March 21st, 2011

A payday loan is a small loan which is given to a borrower when they need to cover funds until the next pay day, hence the name. Once pay day arrives, the small loan is repaid. Payday loans are also known as cash advance and payday advance loans.

Payday loans are short term loans with high interest rates. If you do not use a payday loan properly you could find yourself in worse financial trouble than when you started. If you use a payday advance loan for a little boost until payday it could help you out when you have nowhere to turn.

Payday loans are a quick way of obtaining finance before you get paid at the end of the month, nearly everyone finds sometimes they have spent too much in a particular month and just can’t make the cash stretch.  This is what payday loans are for.

They first appeared in the US but UK lenders started to offer these instant payday loans when they realised the demand for fast unsecured loans was high.

How does a payday loan work?

Payday loans are often needed for something which has cropped up but you don’t have the funds to pay for until payday. You would use this type of loan if you need money quickly and only for a short-term. Payday loan companies are there to give you instant loans and when you get paid you repay the loan.

If you are in need of a payday loan you can find plenty of loan companies on the Internet. If you only need a small amount of cash which you could repay on your next payday then an instant payday loan could be the solution for you. With a short term loan such as this you won’t have months of repayments to worry about.

If you apply for a payday loan online you could get approved on the same day and have the cleared funds in your account the next day.

Who can apply for a pay day loan?

To apply for a cash advance loan you must be over 18 and employed where you have a regular salary paid to you, typically your salary should be more than £300 per month, but it will ultimately depend on how much you want to borrow. Depending on who you borrow from you can be a tenant or a homeowner and you can even have a CCJ or poor credit rating.

The main criterion for whether a loan is paid out is the applicant’s employment status and level of income. This is why a person’s credit history is not considered with this kind of loan. Without the need to credit check the whole process is sped up, creating the ability to approve people almost instantly, with payments often made the same day.  A pay day loan is therefore often the only option available to those with poor credit who cannot get a credit card or other long-term loan.

In order to qualify you only need send through some documentation which verifies your employment status this could be your last few payslips or bank statements. Loan applications are very quick and simple and the whole process can be done in minutes.

If you are considering taking an instant payday loan consider the interest charges and budget accordingly as you will have to repay the loan from on your next payday. If you need to get a payday loan there is a possibility you are already under financial stress. Make sure you cut back on spending to ensure you can pay back your loan within the specified time.

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