Online payday loans and other ways to borrow

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People may or may not even realise that there are a large amount of different ways to borrow money. People need to know whether their financial needs requires them to obtain short term finance or ways to borrow money over longer periods of time. A commonly used short term way of borrowing would be the online single instalment payday loans where people borrow cash for a single month, multi instalment loans are also frequently used where people borrow amounts and then repay them over a set number of months. Other common finance types would be car finance and lines of credit like credit cards.

Before any of the above are even considered to be applied for the customer should know that they one hundred percent need the money is question and then understands how much they need to borrow. The lender is another question that always will have to be considered and there are so many different lenders out there and they each offer different things to the customer. If an application is then made a customer must also be aware of what they are required to pay on the product and they have to then make sure the loan is affordable for them to manage. They will be due payments on the loan normally each month and these have to be met in line with their signed loan agreement. Missing repayments on loans of any kind can nearly always result in severe negative consequences for the person involved and they will not want this to occur. In this article I am going to look at the online payday loans products and also the instalment loan and then explain what I personally think the better way of borrowing money between the two is.

A single instalment payday loan is a small loan provided by a lender to a person for repayments in full along with the interest on that persons next payday which will fall in a single monthly period. A payday loan typically charges a high interest rate. The interest on the product can vary depending on the lender chosen however with this way of borrowing it will upto the Financial Conduct Authorities (FCA) rate cap which equates to £24.00 charged per £100.00 borrowed per 30 day period by the customer. People can then soon start to realise that that is a large cost especially as people can only borrow up to thirty one day period as a maximum. If someone for example borrows an online payday loan for £500.00, the interest charged there would be around £120.00 meaning £625.00 is repaid in a single transaction to close this account in full. For any customer to repay £620.00 on top of all their other possible financial commitments can be hard for someone to manage and it can lead to the repayment or other repayments being missed as a result. Two positives of the product would be the speed in which they are funded after they are approved and also the fact that they can accept applications for people who have a less than perfect credit history.

An alternative to the single repayment payday loan option would be the instalment loan product. This is when someone borrows a sum of money (sometimes larger than a payday loan) but then repays the debt over a set number of months until that full balance is then repaid. This gives customers the flexibility that can often be required on such a product. Once the loan is borrowed, people can then repay back over a set number of months which will be mutually accepted between both the lender and borrower. When people normally think about instalment loans they think about really large loans being funded for repayment then over a number of years. Mostly loans being borrowed by Major Banks or Building Societies however this is no longer the case. More and more direct payday lenders can now grant this product. This means people can borrow similar amounts to payday loan figures but can then spread the repayments instead of clearing the full balance in a one off single transactions. Always be aware with selecting an instalment loan repayment term that the longer the loan is taken over, the more repayments made on the balance meaning more overall is repaid back to the lender, always consider that.