Despite high APR and interest rate, the payday loans are considered the best pick for employed professionals. Employed people pay the high cost of this debt because it relieves all the financial stresses almost immediately. A payday loan is small amount debt up to £500 scheduled to be paid in one installment by the forthcoming “payday”. Earlier the high-cost payday loans used to be free from FCA restrictions but later FCA found it beneficial for the consumers to cap the payday loan. In its own report reviewing high-cost credit products, FCA accepted that the cap on short-term payday loan fees had benefited the consumers. The FCA regulator said there will be a cap for a further three years, and, we will review the cap on wage loan again in 2020.
The Concept behind Payday Loan:
It is short-term high-cost debt given against the next salary cheque. As it is short-term and small amount debt, lenders charge high-interest rate; while the consumer doesn’t mind paying extra for the small amount because he gets the quick cash help instantly without any complex documentation. Today arranging a guarantor is a tedious task even for the small amount of loan, direct lenders eliminated this barrier by introducing no guarantor payday loan. The urgency of quick cash help is addressed by providing instant decision same day wages loan. The basic concept behind salary loan is – “We provide the cash when you need if you pay the cost of this highly dependable facility”.
Why Are The Payday Loans Good For Short-Term Emergency Expenses?Easy to repay debt for an emergency:
This loan format is designed for financial emergencies. It offers quick and easy cash help to manage financial emergencies like accident, car repair, house repairing, burst water pipe repair, window damage etc. All of us come across several unexpected problems that need urgent cash to be resolved. Getting cash help from the regular bank may not be possible mainly because of poor credit score, long processing time or complex documentation but the loan against salary cheque by direct lenders is a dependable financial help. As it is a short-term debt, you get free from paying liability within a month.No need to arrange collateral or guarantor:
The payday loan is unsecured debt; therefore, a borrower doesn’t need to arrange a collateral or guarantor. None of assets or valuables is at risk during the repayment period; therefore, you use the money with peace of mind. However, paying the loan on the time is must secure future prospects of borrowing as well as to avoid late payment fee with additional interest amount that is normally too high. Salary loans are designed only for short-term emergencies not for long-term use.Reduces dependency on credit card:
Using 100% credit card limit harms your credit score card. More you use more you pay. Most of the times, paying back the used money on the time becomes unmanageable. Credit companies know that consumers have become accustomed to “buy it now, pay it later” trend; therefore, an interest rate is charged very high for an extended period. Once you are trapped in unpaid debt, it goes no getting worse. A short-term payday loan helps you manage credit card use under the limit.Convenient to get:
Almost all the leading direct lenders in the UK with online presence offers same day instant decision payday loan. These are convenient to get without any assistance. The required cash help comes to your hand by the next working day. Direct lenders take just a few minutes to review your credibility and to approve the applications. Many of these lending agencies work round-the-clock to help their clients instantly. The application process is so simple that you can do it from anywhere even while on the move.Financial flexibility:
True, the payday loan is given for maximum 28 days but it is a great financial help if used for justified purpose. Because of being small in amount, it gives you better control to repay on the time. Once you pay it on the time, you get privilege to get it again probably at better rate.Freedom to use:
The majority of payday loan borrowers admit for using the debt to meet out recurring expenses. Over 53% borrowers accept for using the payday debt for managing the routine living expenses like to pay the monthly groceries bill, utility bill and rent bill etc. Just 10% borrowers admit for using the salary cheque loan for vehicle repairing or shopping. Although there is freedom to use the availed debt; still, debt should be used for the justified and unavoidable necessity.
The Little Known Facts about Payday Loan:
Because of increasing popularity, the UK’s payday loan industry had become more than £220 million worth in 2017. Because of having high profit ratio, the direct lenders in the UK offer guaranteed same day payday loans at different APRs; they take it as an earning opportunity at least risk. The average short-term salary day loan amount is £260 while the average repayment period is 22 days. In case of failure in on the time repayment, the default payment penalty can’t exceed to £15. The unmarried employed professionals in 25 to 30 years age group highly depend on bad credit guaranteed payday loan; the majority of these borrowers earns below £1,500 /month and lives in rental accommodations. Just 29% payday loan borrowers approach mainstream banks; it highlights the importance of online direct loan stores in the UK. The fast process, online proceeding, high approval rate, guarantee financial help, availability for bad credit score holders, professional friendly help, high transparency etc are the top favored reasons that make direct lenders the preferred choice of employed borrowers.
If we talk in context of Brexit and it’s predicted after effects, the ups and downs in income of every salaried person are sure to occur. Using 100% savings to meet out the short-term emergency expenses may not be a good decision as the long-term economy slowdown is expected after Brexit. Increasing dependency upon the guaranteed payday loan by direct lenders despite the high cost is not a bad development because it helps you keep your savings unaffected by the emergency expenses.