Payday loans can be a useful and easily accessible way of obtaining cash in a financial emergency. With a quick and easy application process, and no need for credit checks, consumers have been turning to online payday loans more and more to fill the gap between paydays, and in times of financial crisis.

However, payday loans typically have high APRs and short repayment terms, meaning that they are not financially viable for everyone. Below are outlined some tips that everyone should take into account when thinking about taking out a payday loan.

Payday loans are not free money

Payday loans have frequently been criticised for having substantial interest rates, sometimes over 2000%. It is worth taking into account that payday loans are rarely meant to be taken out over a long period of time, making this figure somewhat misleading, with the actual amount you can expect to pay being in the region of £25 for every £100 you take out. However, this figure rises substantially if you are unable to pay back the loan within the standard 30 day repayment period set out in your loan contract, and with penalty charges and interest rising rapidly once you have missed a repayment, customers can find themselves paying back the total cost of the loan multiple times over should they struggle with repayments.

UK payday loans online are exactly the same as standard loans in that they must be paid back, in full, under the terms of the contract. Despite being easily obtained and relatively flexible in amounts, they are real borrowings and add to a customers debt in exactly the same way as a bank loan or credit card. When taking one out, you must be prepared to pay it back in full, plus interest.

Research loan providers

Payday loans companies are springing up constantly online. With such a wide range of loans companies offering what appears to be the same deal, it can be tempting to go with the first loan you find, but there are dangers in doing this. Always make sure you know exactly what the terms of your loan are, and how much you are expecting to pay back. For your own safety, you should only borrow from loans companies that are regulated, or affiliated with a financial services provider that you are familiar with, and use comparison websites to get the very best deal you possibly can.

Don’t ask for more than you need

Payday loans offer small loans from around £100 to £1000. In a financial emergency, you should work out exactly what you need to cover your expense and take that amount, with the intention of paying back this full amount on your next payday. In the case of an unexpected expense, it can be very stressful trying to work out where this money is going to come from, and payday loans ease this fear, however, should you take a little bit more cash than you actually need, to ‘get through the month’, you will end up spending far beyond your means, and may find yourself unable to pay back the loan come your next payday, or be forced to take another loan to pay the original one in full, leading to a vicious circle of debt.

Make sure that a payday loan is your best option

Payday loans are a great way to bridge the gap in a financial emergency, such as an essential household maintenance problem, or unexpected bill. In these situations, you are faced with a rare but immediately critical problem that can only be filled with fast cash It is not going to be a regular situation and you will be able to budget and pay the loan back. For general spending, it is best to look at other options with lower interest rates, such as credit cards or an overdraft, and for large purchases a credit card is a good way to buy the product in one payment, whilst paying back over a long period of time without racking up too much interest.

If you are certain that a payday loan is your best option, and that you will be able to pay it back in full, then payday borrowing can be a great way to ease financial stress and get through difficult times easily and without getting into long term debt which will affect your life and credit rating for the longer future.

OK a slight curveball here. We all know that payday loans fill a gap in the market for consumers with short time financial difficulty, making it possible to obtain small amounts of cash quickly and simply, with no need for credit checks or long and complicated application processes. But do they do more harm than good? Never to be one to shy away from what is really important or on the lips of those that oppose the payday loan concept, we decided to tackle it head on. KAAAHHPLOW!

What seems to be the problem here then?

These loans are given out freely with loan companies not making stringent checks on a customer’s credit history or current financial situation, they are increasingly offered to high risk customers, and those already experiencing serious debt problems.

Number 1

Customers in this situation are already clearly not managing their money effectively, and are far more likely to default on their loans, or fall into a vicious circle of debt. Missing repayments means that the added interest and penalty charges can lead to a customer paying the total cost of their payday loan multiple times over, and in a situation where a customer could not afford to pay off the original balance in full in the first place – this just worsens an already sometime desperate situation.

Number 2

Some payday loans companies are unregulated, not us! Meaning the consumer is not protected by the law, and allows the lenders to employ sometimes brutal tactics for getting their money back, leaving customers in severe emotional as well as financial stress.

Step forth the lobbyists

It is with this in mind that many lobbyists have called for payday loans to be banned altogether. This has in turn led many in power; including MP’s and the credit advisers Consumer Focus, to warn that this would just lead to high risk customers being forced to turn to illegal loan sharks in order to obtain cash at short notice – a far more dangerous practice than borrowing from well known and regulated payday loans services. Consumer Focus have suggested a tightening of the rules surrounding payday loans, making them more difficult to obtain for customers with already quite serious debt problems, making the loans work more effectively and safeguarding the customers taking them out.

Some suggestions

Among the rules suggested by Consumer Focus is a limit of 5 payday loans per household per year. Experts have already suggested that payday loans customers should seek financial advice if they need to take out more than three payday loans in any one year, so this advice would just mean payday loans companies would be required to direct customers to independent debt advisers should they reach their yearly limit.

Payday loans companies should also share information between them, preventing borrowers from taking out more than one payday loan at a time – one of the most easy ways to fall into a debt trap using payday loans. Payday lenders should perform more stringent checks on customers to ensure that they are able to make repayments in full on their next payday, meaning they will not be affected by the high APRs and devastating penalty charges which inevitably lead to the cycle of debt.

So, should instant loans online be banned?

Payday loans do fill an essential gap in the financial market, and if used responsibly can be a helpful avenue for those with short term financial difficulties. If customers are aware of the situation they are putting themselves in, and are certain they can meet repayments in full on their next payday, there should be no call for payday loans to be banned. However, and there is always a however in most fair arguments, there should be tighter restrictions in place to make sure that vulnerable customers do not get themselves into a worse financial situation just through desperation.

Payday loans can be a quick fix in a difficult financial situation. They are offered to anyone with an income, deposited into your account almost instantaneously and are easily available. The problems with the cash advance loan online arises when a customer is unable to meet the repayments in full, leading to high rates of accrued interest and large penalty charges, meaning even less chance of the customer managing the repayment the following month. Taking out multiple payday loans increases this risk hugely.

When a customer cannot meet the repayments on a payday loan, it may be tempting to take out another one. Payday loans companies online will not lend more than one loan to the same customer at once for the specific reason that the loans are small cash advances meant to get a customer through the month, and be paid back in full on their next payday. The customer should borrow exactly what they need, and with payday loans going up to £1000 it should not be necessary to take out more than one. However, with there being so many different payday loan lender companies out there, and this number steadily increasing, it is easy to take out more than one in a month from a number of different companies. Payday loans companies do not run credit checks, or investigate your previous borrowings, so you will not run into any trouble when it comes to borrowing from more than one loan company.

Taking out more than one payday loan

However, the reason customers generally take out more than one loan at once is because they are unable to meet the repayments for their original loan. Paying off this loan with another payday loan may fix the problem in the short term, but will quickly lead to the vicious cycle of debt that may result in having to take extreme measures, such as bankruptcy. Customers that are unable to pay off one payday loan will clearly not be able to pay off two or more. You end up being able to pay off merely the interest on your loans every month, and never actually cutting into the original debt. With the interest accruing, inevitably the customer will be unable to even pay off that monthly amount.

In this situation debt consolidation may be the only way out. This can be done by taking out another personal consolidation loan, paying off all of your debts with this higher amount of money and then paying this loan off in one smaller monthly payment. Interest will be lower, and you will be able to pay off the loan over a long period of time, which is a longer term commitment, but the safest way of getting yourself out of a drastic financial deficit. If this is not available to you (for example if you already have a bad credit rating), it is always worth contacting the loan companies themselves, as they may offer you the chance to pay the loan back over a longer period, or in stages. This is at the lender’s discretion, but worthwhile action to take in a desperate situation.

It is not recommended that you ever take out more than one payday loan at a time. Only borrow as much as you need and pay the loan back within the terms set out in your original contract. For situations where you are struggling with debt in the long term, there are free advice services that you can contact, such as the Citizens Advice Bureau or the Consumer Credit Counseling Service, who will offer you advice on getting out of your difficult financial situation.

Payday loans online can be an extremely advantageous solution for people finding themselves in need of a relatively small cash injection towards the end of the month, and that find themselves unable to borrow from their bank due to a poor credit rating or lack of time.

These quick online cash loans remove the need for endless application forms, interviews, credit checks and guarantors, making cash deposits quick and hassle free. Where lenders have come under attack is in their high interest rates and tendency to lend to high-risk customers, essentially perpetuating a vicious circle of debt for those who are already struggling financially.

The issue with fast cash advances through the Internet

The issue here is that payday loans companies do not require a credit check, making them perfect for those who cannot get credit elsewhere. Surveys have found that this has led to almost 70%  of customers being young, single and on a low income. Increasingly, those with outstanding debts have had to rely on quick payday loans in order to pay off other creditors, when their pay cheque cannot cover their outgoings for the month. Of course, payday loans are still debt, despite the fact that they are supposed to be short-term loans, and the last thing customers who are already not able to meet their financial commitments with their earnings need to do is add to their debt. This means that on their next payday, paying back the loan has to come out of their pay cheque, but with interest, meaning the customer is already lower on money than they were before they took out the loan. In order to refinance their account from this loan they are forced to take out another loan of a slightly higher amount and this creates a cycle of borrowing, repayment and borrowing again that will eventually leave the borrower in an unsolvable financial crisis.

In this situation, online payday advance loans become more of a financial burden than a short term solution to a brief cash flow problem. Money experts suggest that where taking out a payday loan may be the answer to a financial crisis if all other avenues of lending are closed to the customer, it is rarely a good idea to pay off one loan with another, as it is a very short term solution which may harm your credit score irreparably in the long run. Looking into a high-interest savings account or ISA before getting into debt is the ideal solution, as when you are hit by an emergency expense you will already have a pot of money to dip into, which you can then replace at your leisure, and without the worry of interest or heavy-handed tactics to get you to repay the money.

Getting out of a cycle of payday lending

But what if it is too late for you and you have already gotten yourself into this circle of debt? There are ways to get out of debt, and the most important thing to do is to work out how much you owe, how many creditors you have, and which expenses are the most urgent. Once you have worked out a total of your debt it will be easier to manage, and not quite so daunting to imagine getting out of it. Look into credit counselling or free financial advice services to work with someone who can help you negotiate repayment plans and work out compromises with your creditors. It is usually worth consolidating your debt through a low interest loan that will then break your debts down into one manageable amount every month.

However, if your credit rating is low, and this is what forced you to take out payday loans in the first place, you are unlikely to be able to take out a loan from a safe source, in which case your only solution may be to look into bankruptcy. This should always be used as a last resort, and will affect your credit rating severely in the long run. It does, however, write off your debts and allow you to get back on your feet living life in the black again. You will not be able to get credit for a set period of time which means relearning to live on your income, and not spending more than you earn.

Being cautious with online loans

When looking at payday loans there are a few points to note, in order to stay out of the circle of debt and to make sure payday loans are an easy and pleasant experience for you.

• Keep the loan amount borrrowed as low as possible. When borrowing from a payday loans UK company try to work out in advance exactly how much you need for the situation you are in and borrow nothing more than that. With cash loans companies online offering up to £1000 to be deposited into your bank within one hour, it can be tempting to borrow more in order to give you a little extra for the month, but this is your own money you are borrowing, and paying the company for the pleasure. Remember that you will need to live off of the remainder of your pay cheque for the rest of the next month.
• Only take out no credit check payday loans in an emergency. If you have looked at all other avenues of lending and a payday loan is your only option then use it, but ensure that the expense really is an emergency and could not wait until your next pay day. Online short term loans should never be used for casual spending or non-essential purchases.
• Budget. Work out exactly how much money you have coming in every month and how much is going out. What is left is your expendable cash every month. Try to take any emergency purchases out of this and cut back on luxuries for the rest of the month. If this is not possible and you are certain that you can pay back everything you owe the following month, only then should you look into payday loans.

On the 14th July, the Customer Finance Association (CFA) drew up a code of practice for payday loans companies, aiming to put peoples minds at rest on the subject of the considerably high interest rates put on these emergency loans.

The new code of practice promises to ensure that lenders will never encourage customers to borrow more than they can afford to pay back, and that they will clearly explain the costs involved and the consequences of a late repayment. The CFA have since been criticised by money experts, who claim that this list of promises does nothing to prevent payday loan customers getting into a circle of debt, despite the CFA’s pledge to offer customers details of free debt advice services before taking out their payday loan.

So are payday loans really too expensive? And are customers risking falling into a debt trap that will inevitably force their financial situation into a worse position than before?

Payday loans companies typically charge APRs as high as 4,120%, a shockingly high rate which many detractors have taken as proof that payday loans are the very last place borrowers should be looking for a financial boost. However, this APR is misleading. Payday loans are unique in that they are never supposed to be borrowed over the space of a year, they are one-off loans meant to be paid back within a month. Put in simple terms, you will generally pay back £25 for every £100 you borrow, and this is generally put to you as a one-time ‘fee’, rather than as ‘interest’. Where you will run into trouble is if you are incapable of paying back the loan under the terms set out in your original contract, at which point the high level of interest does become a factor.

Payday loans companies need to charge interest at this level because the loans are repaid in such a short space of time. If a customer were to take out a £100 loan over the space of a year, at an interest rate of 20% (already quite a high rate of interest), the amount they will have paid back by the end of the year would be £120. However, if this loan was taken out only for one month, the repayment amount would only be £101.67, at a profit to the company of £1.67. Although rates as low as these would make payday loans far more popular, it is doubtful that the companies would be able to stay afloat on such a small amount of profit per customer.

Most payday loans companies lay out their conditions for lending in unequivocal terms, stating the full repayment amount from the outset (frequently as a ‘fee’ rather than interest, so you are able to see the full amount the loan is costing you in black and white). If a company is shady about their interest rates, or the amount you are expecting to pay back, make sure you are completely clear and have in writing what the terms are. If you can’t get this, then look elsewhere.

Using savings for emergencies

Financial experts suggest that it is still better to have savings put away for emergencies, and, if this is not an option, ask your bank for a temporary overdraft extension. With these options being the only interest-free ways of obtaining cash in a crisis, they are clearly the first port of call to anyone who finds that they need to bridge the gap between pay days. They also suggest that if your expense can be left until your payday, it is better to wait, as payday loans are (by the companies themselves’ own admission) not meant to be used for casual spending, or a purchase that is not absolutely critical.

Payday loans do fill a much needed niche in the loans market, offering same day deposits to everyone, even people who struggle to obtain credit anywhere else. In order to lower the APRs on payday loans, companies would need to start looking into extending the time of their loans in order to make any money, which would lead to the possibility of having to credit check all customers, and the fear that if a customer’s circumstances change over the space of that year they may not be able to make repayments. This would make payday loans online as they are now disappear altogether, becoming more standard loans, which are already offered by a number of companies, and the banks themselves.

When should you use a short term loan?

Simple Payday suggests only using short term loans online if they are really the cheapest and most viable option in your circumstances, and that if you need to use payday loans more than three times in a year, it may be worth seeking financial help to solve a more long-term problem.

With this in mind, the relatively ‘high’ costs of payday loans only exist to those who are not clear on the terms of repayment, or fail to pay the money back in the time agreed – a situation which is just as common with bank loans and credit cards as with our online loans.

A recent survey by Consumer Focus discovered that payday loans are on the rise, having increased fourfold since 1996. Payday loans are a quick and easy way of temporarily improving your financial situation, whatever your credit rating or situation, and with banks holding back on lending in the current climate, have quickly become one of the only safe ways to borrow for those in need of a financial boost in a hurry.

Situations like an unexpected bill or household expense, when your payday is still weeks away, can lead to financial and emotional stress. Credit is still difficult to obtain since the credit crunch, leading to consumers feeling trapped within the limitations of their earnings, and feeling that they have nowhere to turn when their financial situation becomes difficult.

Majority of payday loan users under 35

Consumer Focus found that this method of lending is increasingly popular with young business people, with a majority of borrowers being under 35, single and with no children. They tend to borrow in order to fill a shortfall in their wages and to fulfill short term needs, rather than more long term investments, and almost 70% have an income that falls below the national average of £25000 p.a. Most borrowers are repeat borrowers, a situation which has caused concern among detractors of payday loans, suggesting that this form of lending actually encourages long term financial problems, rather than simply being a short term solution. However, a recent study by MoneySupermarket.com found that less than 20% of payday loans were taken out by people in need of extra cash for living expenses, whilst a large majority of loans were applied for by people who had an emergency cost or special occasion to pay for. This suggests that although the need for payday loans is increasing rapidly, consumers are still only applying for the loans as a one-off quick solution, not a long term way to manage debt. Having had a good experience with payday loans, these customers will then place payday loans high on their list of options for emergency cash flow problems, leading to repeat custom.

Being cautious when using fast credit loans online

If you are looking into taking out a payday loan, it is most important that you are certain that you will be capable of paying back the full amount of the loan when your pay cheque clears. Payday loans can be an expensive way of borrowing, with a high APR, and the costs of renewing your loan will quickly outweigh any positives from taking the loan out in the first instance. Paid back quickly, however, a payday loan can have one of the lowest interest rates on the market, as you are making a one off interest payment, rather than spreading it over a long period of time allowing interest to build. With this is mind, though, although banks are not lending as much as they were pre-recession, it is always worth asking for an extension on your overdraft before turning to a payday loan, as with an approved overdraft you will not face and interest at all on your borrowing. It is also worth checking what your options are when it comes to unexpected bills or payments, as many companies will allow staggered payments, or will work out a repayment plan with you that fits better with your needs. If these options have been exhausted and you are certain that you will be able to pay back the loan on your next payday, then payday loans can be an effective and simple short term solution.

According to results from Consumer Focus, the majority of payday loans customers fall into one of three categories.

• Long term negative experience
• Short term mixed experience
• Short term positive experience

Payday loans as a one off solution

Customers who use bad credit online loans as a one-off solution in a time of financial need tend to have the best experiences, and payday loans should give positive financial help to those who need it, not be a stepping stone to more serious debt problems. They work out cheaper and less problematic than unauthorised overdrafts or long term loans (which people have a tendency to avoid in short term times of financial need, as they worry their situation will change and they will be unable to pay it back).

Research the payday lender

If you are going to use a online cash payday loan, it is important that you research the lenders credentials before you take out the loan, using comparison websites or search engines to find out others’ experiences, and for real peace of mind choose a company which is affiliated with a financial services provider that you recognise.

Payday loans are a simple and easy way of bridging the gap when an unexpected expense crops up between pay days. They are far safer (and legal) than borrowing from a loan shark, and have much less impact on your long term financial situation than taking out a long term loan, credit card, or going into an unauthorised overdraft. If the interest rate is manageable and the company verified, they can be an extremely positive solution to those going through a brief period of financial difficulty. They are not, however, a solution to long term debt or severe money struggles. In those cases you are better off speaking to your bank, or visiting a consumer finance website, in order to work out a safe and secure plan for your financial future.

With the cost of living increasing rapidly over the past few years, and not being matched by average salaries, consumer demand for what are known as payday loans is rising constantly. When the Recession began in the UK in mid 2008, many banks were forced to stop lending altogether while they tried to recoup some of the money that had been lost, and this situation has never been fully rectified. In a survey conducted by the Bank of England at the end of 2010, they concluded that banks are not expecting to increase lending any time soon, particularly not to consumers, and this means that in times of financial difficulty, people are more likely to consider financial help from other outlets.

Payday loans are relatively new to the UK market, having only appeared a few years ago, and being practically unheard of until around 2008. Nonetheless, demand for payday loans is increasing rapidly, with a survey by Consumer Focus estimating that 1.2 million people in the UK are now regularly using payday loans, borrowing an estimated combined total of £1.2 billion.

Payday loans are essentially bridging loans which help to get customers from one payday to another by means of a relatively small cash advance, paid back on receipt of your next paycheque. If you find yourself urgently in need of cash to pay an unexpected cost when your payday is a week or so away, a payday loan will bridge that gap quickly and easily, with no need for a credit check. Customers with bad credit ratings can apply for payday loans, as all you need to prove is that you have a regular income (usually by providing your last payslip or bank statement) and an active bank account for the money to be deposited into. This means that payday loans are a helpful and accessible way of borrowing cash for anyone with a regular income.

However, payday loans companies often have trouble recouping the money they have lent out, with a recent survey estimating that 10-20% of customers default on their payday loans, something which is a strong possibility when lending to high risk customers. Payday loans companies can often have to resort to strong tactics in order to get their money back which is why when taking out a payday loan you should always be confident that you will be able to pay back the cash you borrow.

How much can you borrow?

Payday loans companies can lend out anything from £80 to around £1000 in one transaction, meaning they are a good source when borrowing for unexpected household expenses, urgent car repairs or tuition fees. If you have all of the information necessary with you, the money can be deposited into your account on the same day, or at most after one working day. You can only take out one payday loan at a time, so it is important to make sure that you take out exactly what you need, as you won’t be able to borrow again until your original loan is paid off. Companies generally offer repayment plans of around 14-31 days meaning it shouldn’t matter whether you are paid weekly or monthly, or how far away your payday is. It is important to remember, though, that payday loans should never be used as long term debt-management solutions, as the interest you are charged can easily start to overtake your salary if you borrow continuously with no real way of recouping the money from what you earn.

Criticism of Payday Loans

Payday loans have been criticised for setting interest rates of up to 4000% APR, however interest rates do vary per company, and a study by the Daily Mail concluded that a typical customer borrowing £100 will likely only pay back £20 in interest, compared to the costs of going into an unauthorised overdraft with Lloyds TSB which will cost you a monthly fee of £5 and a daily fee of £25.

The cash advance loans service is confidential and customers’ personal information is safe, meaning that taking one out will not affect your credit rating. This is another reason that payday loans are becoming so popular, as an unsuccessful bank loan application can affect your credit rating negatively, leading to more unsuccessful loan applications and so on. Bank loan applications also tend to be a long and unforgiving process, which can take up to a month to approve and appear in your bank account.

Online payday advances are a quick and simple way of borrowing, that is available to all customers with an active bank account and regular income. It is fast and convenient, and customers can borrow repeatedly without fear of adversely affecting their credit rating. It is, however, important that customers thoroughly research the company they borrow from, and not accept worrying interest rates or badly rated companies out of desperation. With a little forward planning, a payday loan can be a good short term solution to troubling financial times.

The owning of a laptop computer these days is hardly what could be considered a luxury, but more an essential part of life which seems to somehow find its way into most of our daily routine. Pretty much every traditional activity has in some way been influenced by technology, whether it be conversing with friends, shopping or other elements more related to work. Needless to say, living without one is certainly not impossible, but considerably less convenient. Unfortunately, computer hardware across the board has never been the cheapest investment, often requiring a buyer to spend time saving up or perhaps enter into a credit agreement in order to get their hands on what they need right away. There is an alternative option however, which can provide you with a perfectly suited laptop loan in the simplest possible manner.

While buy-now-pay-later systems are a great way of minimising the delay in obtaining a product, they often involve rather steep interest charges as a fee for using the service. Quite often, it is possible to pay an additional 50% of the item’s worth on top of the RRP which somewhat dilutes the appeal of the process. Furthermore, the general requirement for a high level of credit worthiness excludes a vast number of potential buyers from such schemes, leaving many with little option other than to save up or go without. That is of course, unless a payday lender is sought for a same day online loan service.

Borrowing £1000 and under

As the amounts offered to borrowers by us are of £1000 and under, it has never been more possible to create a tailor-made agreement to suit your needs down to the letter. While not strictly a laptop loan service per se, the cash is yours to spend however you wish and so long as you can agree to pay the balance back on time, your life history and intentions remain entirely your business. Furthermore, credit checks are a non-entity in the world of our instant loans online opening up the service to anyone simply requiring a quick cash injection to help tide them over.

Of course, such services do not come for free, but when compared like for like with the alternative, payday loans can often prove the most cost-effective solution by far. For example, in the case of our loans a flat rate of £25 per £100 borrowed is charged on all loan amounts. There are no upfront fees, no ‘admin’ charges (whatever on earth they are!) and no nasty surprises later on. Compare this with an annual term for a hire-purchase agreement where an initial deposit is required, an entire year’s interest payable and the privilege of facing heavy fines for early repayment and it is easy to see why a loan from a payday loan provider makes infinitely more sense.

Needless to say, it does not even bear thinking about the consequences of going overdrawn for such a purchase…anyone who has found themselves on the darker side of a zero balance will surely testify to this!