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May 19, 2020

Payday Loans - what you need to know


A Detailed Guide to Payday Loans

You might be searching for more cash to help you survive through the month, or you might need to borrow more money to fix an essential item or buy a necessary thing like an emergency tool for your house that got spoilt, payday loans can help you financially.

There are those times you require a quick loan, especially if you cannot find any other source of money.

For instance, someone might not qualify to take a business loan or might not meet the requirements for a bigger loan. In such situations, a payday loan comes in handy to fix your short-term financial problems and help you survive until your next payday.

What is a payday loan?

It is a short-term loan which is meant to help you survive until you get paid. Generally, it is deposited directly to your bank account that you prefer. The repayment should be made on the day agreed by both the borrower and the lender.

Usually, you will pay extra interest on top of what you borrowed. Borrowers can calculate this using tools like the online payday loan calculator that can show them the initial amount borrowed as well as the added interest and the total amount to be paid.

Payday loans are mostly monthly loans. However, this will depend on your next pay date and your financial circumstances. You can use the payday loan in any way you prefer; whether it is to pay sudden bills or emergency item replacement.

How much can someone borrow?

The limit for people borrowing for the first time can be limited to a certain amount, such as £500. For instance, Expert Payday Loans offer loans of up to $1000. However, several things determine the amount one can borrow:

  • Your current credit rating
  • Affordability assessment
  • The borrower’s financial history
  • The current criteria of the lender

Your financial situation is considered while determining the cash you can be given through a payday loan.

This is because the lender needs assurance that you can repay in a manageable and transparent way. Because of this, short-term, high-cost loans might not be suitable for individuals who are struggling with daily financial needs.

Because many people frequently need payday loans, most lenders aim at transferring the loan into the borrower’s bank account within minutes after loan approval.

How much interest do you pay after taking a payday loan?

Mostly, payday loan interest varies from one lender to another. The good thing is, most of the interest rates on these loans are determined in Representative APR, which makes it easy for borrowers to compare it among different lenders. This method is higher on payday loans compared to other loan types since it is calculated as being spread throughout the year instead of the short period of the loan. It means that the amount you pay as interest on the payday loan calculated by Representative APR will be more than if it was a longer loan. A borrower’s APR interest can be determined by his/her income or credit rating.

Additionally, a payday loan can have daily interest options. Because of FCA regulations, borrowers will never pay a daily interest exceeding 0.8%.

Early and late repayments

Some lenders give borrowers a chance to repay their loans early, which means there are no additional charges for repaying the amount they borrowed if it is possible to pay sooner than the expected date. Through this, a borrower can pay the loan early and using the payday loan services that accept daily interest, he/she might end up paying less money than he would have.

Note that payday loans can lead to financial issues if you fail to pay them in the time you agreed with the lender. One obvious thing that will happen is interest will keep rising. This will hurt your credit rating, thus affecting your credibility when you want to take other loans in the future.

If you need more help when it comes to payday loans, contact our experienced team of financial experts. We can offer the best solution for you as well as give you the best solution.

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