What are instant payday loans?

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Instant payday loans

Payday loans have been ruling the industry for quite a while now. Even though they are one of the most controversial form of credit in the lending industry and several debates and recommendations have been submitted for these loans to get banned, these loans were less rigerously regulated until the Financial Conduct Authority laid heavy regulations on them. Let’s see what instant payday loans are and how they can improve or worsen your financial condition.

What are instant payday loans?

As the name suggests, instant payday loans are the payday loans which get approved instantly. Well in fact 'instantly' has grown over recent years and in fact now take longer than the few minutes they used to to get approved. While they are often still referred to as 'instant' due to more robust underwriting applicants now expect them to take longer - however an instant 'provisional' decision is still possible but usually means you have passed the lenders baseline criteria.

What are the requirements for instant payday loans?

To get instant payday loans, a few necessary requirements must be met. Firstly, you should be a resident of the United Kingdom. You must legally be over 18 however lenders may insist that borrowers are older than this. You must have a steady job and must be able to produce income proof for the same. Basically, you must be an employed, salaried UK resident. Self-employed people can get these loans although some lenders (including True Blue Loans) do not lend to this group.

How do instant payday loans work?

As the name suggests, payday loans are given to people with incomes. You apply for the loan and the amount gets deposited into your account. The repayment date is on your next payday, that is, the next payday when you will receive your wages. On the date of repayment, the loan amount along with the applicable interest is deducted from your account and the loan is successfully paid off.

How do I apply?

You need to choose the payday lender from whom you will be taking the loan. You should choose the lender carefully as there are a lot of lenders who use malpractices to churn out cash from you. So research carefully and choose from among the best instant payday loans lenders.

Once you have chosen the lender, go to their store or their website and apply. Remember to fill only correct information, as verifications are done and filling false information into the form can be viewed as fraud. Fill in the form and you will be explained the interest rate and everything you need to know about that loan. Do not hesitate to ask questions and clear your doubts. Once you are sure, go ahead and provide any documents that they ask for. Generally, the lenders may ask for your ID proof, residence proof, income proof, bank account details, debit card details, and other such relevant documents.

Many lenders, particularly those online will carry out many validation checks electronically so just because you are not asked for documents does not mean they haven't validated the information you provided in the application.

Can I apply online?

Yes, most of the major lenders now offer online application on their websites. You just need to go to the website of your lender and fill-in the form. After your application is submitted, you may need to submit the required documents and details before a final decision is made.

What if I have a bad credit record?

One of the advantages that instant payday loans provide over other forms of credit is their easier availability to the borrowers. However this DOES NOT imply that they will lend to anyone regardless of how bad their credit is. A credit check is to satisfy the lender that they will get their money back, or at least the risk of them not getting the money back falls within their criteria. Payday lenders may have different criteria to the banks for what is an acceptable credit risk, but there is still definitly a line below which you will not get the loan.

What if I am unable to repay the loan on time?

If you are unable to repay a payday loan on time due to some unavoidable reasons, there is no reason to panic. Thanks to the FCA regulations, it has been made mandatory for the lenders to help their borrowers to pay off the loans.

So if you default on the payment, you must talk to your lender directly. You must explain your difficulties to the lender. This way, the lender will come up with an alternate payment plan for you and you may be able to pay off the loan in easy instalments. This way you will not be put a greater harm and over a period you will also become free of debt.

Why is the interest rate of payday loans so high?

You must never forget that payday lenders are in the market to do business, to earn money. It lends to customers who, as a group, have a higher chance, even with proper underwriting and affordability assessments, of defaulting on their loan. They need to match that risk with higher charges. It is not unlike a moter insurance company charging a higher rate to the pool of young, inexperienced drivers compared to those middle age customers with many years of experience. It may not seem 'fair' if you are the one who does pay back, just as it doesn't seem fair if you are the one who doesn't have the motor accident, but this is a common model in many industries.

How should I stay away from debt?

You must keep in mind that instant payday loans are a remedy to save you during a major financial crisis. These loans must not be used for luxury purposes like going on a vacation, buying jewelry, buying a vehicle, etc. Such uses of loans turn it into a bad habit for the borrowers who then never stop borrowing and take out payday loans every month. This habit in the long run can do a great deal of damage to your financial condition.

Hence, you must see instant payday loans as a remedy for emergencies and not a way to buy luxuries. Payday loans can be very useful at difficult times, but they can even turn ugly if used incorrectly.