With all the different types of credit available on the market, deciding what type to choose can be difficult once you've decided that you need to get hold of some extra money. Credit cards, personal loans, bank overdrafts, payday loans - all of these have advantages and disadvantages. A full comparison is beyond the scope of this article, but we can at least set out the good and bad points of one particular type - the fast money payday loan.
The first advantage is contained within the name, and these loans really are quick to arrange. In many cases you can expect to see the money in your account within a working day of your loan being approved, and most loan providers will make an approval decision almost instantly. It's easy to see, then, that if you really need money urgently, a payday loan is probably one of the fastest ways of getting it.
The other major advantage is the easy approval criteria. It's not hard to get a wage day advance, and while the specific rules will vary from lender to lender, the basic requirements are that you have regular employment and a suitable bank account. Your credit history is of little consequence in comparison to other types of borrowing, and in fact many lenders don't even carry out a credit check. This of course makes these loans very attractive to people with poor credit ratings who might struggle to get credit anywhere else.
It's not all positive though - there is a major downside, and that downside is the cost. The flat fees charged of around 20% of what you borrow, when combined with the short borrowing period of days or weeks, add up to some pretty horrific APR figures. Expect to be quoted interest rates of well over 1000%, and while these figures give a somewhat distorted impression of how much you'll actually pay, there's no denying that payday loans come at a heavy price. If you're already struggling financially, then the burden of paying the money back along with the high fees might be the straw that broke the camel's back, tipping you over into serious money troubles.
So should you take out a payday loan? If you need money urgently, have a poor credit rating, and will find it difficult or impossible to raise funds from another source, then you may decide that the high price is worth it. Just make sure you understand what you're getting into before you apply.
Martin writes for a site offering fast money loans to United Kingdom residents.
Home Articles Privacy Policy About Us Contact Us