Some of the benefits and the negatives of the payday loan product

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Before anyone even considers applying for a loan they have to ask themselves a few things such as do they definitely require the loan in question and if so how much are they looking to borrow? They have to question what type of loan do they need and whether it is for a short term financial fix or are they considering their long term financial future. Is it a short term loan like a payday loan needed or is it an instalment loan over normally a longer time frame. They will also have to decide what lender to apply through and this at times can be a hard decision as there are so many different lenders out there in the market place and they each offer different benefits and negatives to their potential customers. In this article I am going to explore the payday loan product further and explain the benefits and negatives of that particular product.

One the main benefits of the payday loan would be the speed in which they can funded to the customer. If any application for example is accepted then the loan can be paid to that customer the very same day without that person being charged for the same funding service. With a payday loan also some lenders can pay people out within just a few minutes of the application being approved. This can be ideal for a customer who needs the money quickly or if any sudden finance bills unexpectedly popped up at least those could now be paid by the customer. Same day funding for me is the strongest benefit that the payday loan product can offer to the customer.

Another benefit of the product would be the fact that they can lend to people who have a poor credit repayment history and people that have found obtaining finance hard in the past. People will at times have a poor credit rating so at least they know a payday loan could still potentially lend to them the money they need. It must be stressed that no lenders now offer loans 'regardless of credit history' as this is against regulations, it is simply that these lenders will accept some items of bad credit that mainstream lenders may not. I think due to the risk of lending to those particular set of people that is why the interest is high.

A negative of a payday loan would be the interest that is charged on them. Some payday loans can have high interest costs so people can more or less straight away see that this is going to be one of the more expensive ways to borrow money. Each lender will be different in the interest and charges rates however many companies that offer products the same or similar to these can charge at teh capped rate of  £24.00 per £100.00 borrowed per 30 days, or 0.8% per day.

The lack of flexibility on the product is also a real negative when borrowing a 1 month payday loan, they are designed to be borrowed and then repaid on that persons next payday and if that is not possible then the customers remaining options are limited. Payday loans when borrowed due to their large interest rates and the capital charged back in full can be hard for someone to pay in a one off single transaction.  

Repayments on the payday loan product 

There can always be times when someone has established they are struggling financially and they need to borrow money for a so called short term financial fix. This could be an unexpected repair, a large bill or a one-off unplanned cost and in such times some consumers like to consider payday loans. This is where typically someone borrows an amount of money but then repays that debt back on their next payday, normally within a single monthly period of up to thirty one days. Before any loan agreed whether it be a payday loan, other short term loans or instalment loans a customer has to think about the following things, do they need the loan in question? What kind of finance is needed and how much do they intend to borrow? They also have to decide on the lender the application will be submitted through. There are so many lenders to choose from out there so this it can be difficult decision to make, each lender offers different positive and negatives in the way of borrowing so these should always be explored carefully before a decision is made.

When a loan has been approved and funded to the customer in question they have to repay this debt over a single monthly period on their next payday. They have to repay in that transaction the capital borrowed and any interest added to the product and this as a result can leave a large amount required to be cleared in a single one off transaction. It is because of the short repayment terms offered on a payday loan and the fact that they can lend to accommodate people with bad credit that they charge high interest rates as lending to their range of customers always offers a risk factor. The standard payday loan interest is often charged at around £24 charged per £100 that is borrowed per 30 days, this could change dependent on the lender used but that is a maximum rate. An example to show how it can be tough for repayment would be for someone to borrow £300.00, the interest charged there would be around £72.00 meaning on their next payday they have to on top of their other bills have £372 taken from their account. This is a large amount of money to be taken from the spare income for that person to live off for the rest of their financial month.

It can be common that with a payday loan if someone is struggling to repay the debt off in full that their extension product will be offered. This however should be avoided, it is when a customer pays the interest only one the loan without touching the capital. This may sound like the cheaper option but it is definitely not, when making the interest only payment none of the capital is being paid so the money is basically just dead money and is going straight in the lenders pocket. People can extend their loan up to twice at teh descretion of teh lender and after that it is either pay in full or go into arrears This is a very expensive option that should clearly be avoided at all costs.

The payday loan and the borrowing alternatives 

There are bound to be times in life when consumers need to borrow a small sum of money. One choice available to consumers is the traditional payday loan option. These loans allow the customer to borrow on a short term basis, a small amount often due for repayment in full on their next payday. There are alternatives to this traditional payday loan, such as instalment based payday loans.

True Blue Loans offer loans up to £500.00 and £300.00 for first time borrowers. They allow repayment terms up to six months to give the customer flexibility and does not mean a large one-off repayment is required. A customer looking to borrow from True Blue Loans can apply for a loan repayment term offered over three, five or six months. Applicants have the option to try out each repayment term as part of the online application and then can make the final decision at the point of submitting the application.

Interest is applied daily meaning the total amount repayable is reflective of the period of borrowing. Consumers should take this into account when considering a True Blue Loans loan or any form of payday loan. For those customers who want to pay off the account early this can be done at any time without being penalised.

Another possible benefit for considering True Blue Loans as a suitable short term borrowing device is the ability to receive the loan the same working day in the case of successful applications. People exploring finance normally would like the option to receive the money in a timely manner and this is the aim here with True Blue Loans.

In regards to their application process this is something that is completed online and whether the application is accepted or not there will be no charge for simply submitting one. 

 

Payday loans can turn out to be an expensive way of borrowing

 

People at some stage may decide that they need to take out a form of finance, this could be for a major purchase in their lives such as a new car or maybe a house. People also could borrow loans for things such as home improvements however a very common type of finance is the short term loan borrowing option known as the payday loan. It is the payday loan that I am going to explain about in this article in more detail and then state how I think this can turn out to be an expensive borrowing option and there are definitely better ways of borrowing out there in the market place.

A payday loan is still a very expensive borrowing option for any consumer involved. People who borrow this way will know that the product in question has a high interest rate and as they have to pay in full on their payday this can be hard. I feel that because they lend to potential risky potential customers they can charge larger interest rates than the so called high street lenders. 

Payday Loans

Quite often the image associated with payday loans is one of misunderstanding and negativity. In some respects this is completely understandable, when the short term lending market exploded into life about 8 years ago it was something that the internet had never really provided before. Overnight there were a selection of short term lenders that appeared and with that the promise within a very short period of time to delivery funds to your account for very few questions asked. This in itself was welcomed, what followed is what has built a somewhat tainted image for the industry.

The fundamental issue with payday loans was not just  the product itself but a number of lenders that provided them. The principle of these loans is very simple, borrow a small amount of money until your next pay date; which the consumer provides. On this date you repay the full amount as originally explained when deciding whether the loan is suitable. Therefore providing the consumer has the intention and ability to repay the product model is a clear one. Unfortunately as time went on it became clear that often these large one off repayments were not always suitable for the consumer base they were designed to serve and as a result the principle of extending the loan balance came to life. In such instances a customer could chose to repay simply the interest of the loan and therefore delay the full repayment of the loan until their subsequent pay date, when given another month had passed, the same amount including interest again was due.

Thankfully now the short term lending market is changing massively with payday lenders becoming more regulated and a new breed of lenders offering far more flexible instalment loans is coming to life. With this move responsibility is becoming more equally placed with both the lender and consumer alike. This is refreshing to see in an evolving market. Previously due to the manner in which short term lenders operated it was often their practices which were criticised and as we have investigated, quite rightly so! However now that the lenders offer a choice of repayment terms and are moving towards asking customers to be honest about their affordability, the industry is regaining a positive image.

Payday Loans Online

As a short term instalment lender I can see nothing wrong with those who take out payday loans online providing the circumstances are right. For the borrower that really does have a short term cash flow problem, which will only last a month and then they will not only be back on track but be able to repay the loan in full WITHOUT them being short again the next month. An example of this could be that having just paid for your holiday out of this month’s salary, you have an unexpected bill for 4 new tyres on your car. The loan will pay for the tyres (which you need now), and because you will not have the holiday to pay for next month you will be able to pay the loan off in full.

If this is not the case you will still not be able to pay the loan off without being short again next month. Many lenders who offer payday loans online have the solution…the dreaded rollover. Why not pay just the interest and keep the loan for another month. All you have done is deferred the problem because you still have to find the full repayment a month later…it has just cost you another month’s interest. 

It may be a better option. Instead of going for a single repayment and then being forced to extend when things fall over, why not start off on a plan that is realistic, affordable and where each payment improves your overall situation. Take a loan with us and you will be able to choose a term of 3, 5 or 6 months to bring the repayment each month to something you can afford. Each month you will be paying off capital so that at the end of the term you will owe NOTHING. Better still, if you go for a longer term to ensure you can make the repayments you can pay back early and because interest is calculated daily you will save money. So in theory, you could use an instalment loan as a payday loans and just pay it all off early at your next payday, but have the safety net in place in case you cannot afford it all.

So if you need short term finance, before you look for payday loans online, why not try looking for an instalment loans online?

 

By Kieran Moulden