// PAY DAY UK

Is a Pay Day Loan Right For Me?

Pay-day Loans can actually be a really good resource for temporary funds, if you only need a short gap boost. The key is to remember, a Pay-Day loan is just that – till pay day. If you repay by the date that you agreed, then you should have no problems whatsoever.

In most cases, the payment is due in full at the end of the next payday, usually taken out by direct debit, in full. Any extensions in that date will end up costing you considerably more than you would have anticipated. Late charges further add to the base you have to pay back.  The average loan size is between £100 to £1500, it is worth noting that there are no restrictions on the interest rates payday loan companies can charge, although they are required by law to state the annual percentage rate (APR) payable on the loan.

If you have any doubt about being able to pay a loan back on your expected date of pay cheque arriving, then don’t take one out, it’s that simple (see our page on When Pay Day Loans Arent Right For You).  You may want to consider alternatives in that case, and on our Alternative Short Term Loans Pages, we have highlighted a few examples.

Key things to Remember when Considering a PDL

  1. Interest rates are usually over 2500% APR
  2. They should only be used for small mounts that can e covered by your payday income
  3. Keep the days as short as possible, the longer you have the loan, the higher the interest you will have to pay on them
  4. Don’t default, late fees can actually end up costing you a lot more
  5. Make sure that they are a short gap help, and that you have tried other forms of short term loans.

Advantages of Pay-Day Loans

  1. Easily obtainable, and in most cases immediate decision
  2. Bad Credit isn’t usually a problem.
  3. Fixed visible end payment when you take out loan
  4. High number of lenders in the market
  5. Useful for emergencies

Disadvantages of Pay Day loans

  1. High APR Rates, between 20% to 35% of the total borrowed. £100 could incur a charge of between £20 – £35
  2. High Penalty rates upon late payment – you could incur minimum £20 every time your payment defaults.
  3. Broker Fees – many high street lenders charge broker fees, which could further add to the bottom line you have to payback. It’s probably best to apply online direct to the lenders rather than using brokers.
  4. Aren’t a Long term solution. If you are in debt, then you should really avoid PDLs. You should only take one out if you can afford to pay it back as well as the interest.
  5. Rollovers (extending your deadline) can end up costing you more than you borrowed.