Payday loans frequently asked questions
What is a payday loan?
A payday loan is typically a short-term loan that is offered in order to help the borrower meet an immediate or urgent financial shortfall. In general expectation is that the loan will be repaid in full (including interest and service fees) on the borrower’s next salary date, hence the name, payday loan.
An example of why you may need a payday loan is, if your car breaks down, you might find yourself short of the cash required to get it repaired and back on the road.
Payday loans are usually unsecured. This means that the borrower does not need to provide any security (assets) to obtain the loan. The result is that the lender charges a higher interest rate than a secured loan in order to cover the higher risk of the borrower defaulting.
Payday loans have gained massive popularity and publicity in the recent years. Loans of this type have been around for many years but recently there has been a boom with new and existing lenders providing their payday loan services online. With internet access becoming commonplace in most households, it means that borrowers do not have to leave the comfort of their own homes in order to apply for a payday loan.
There are many online payday lenders and it is hard to have a discussion about payday lending without mentioning one company in particular, Wonga.
Wonga is arguably one of the most progressive online lenders in the marketplace today. It was founded in the UK and was launched in 2007, soon becoming a household name and one of Britain’s largest providers of short-term loans. One of the main reasons why online payday loans became so popular is because there is often no paperwork, telephone calls or branch visits required to submit a loan application. Wonga in particular, rely on their automated systems to make their lending decisions and if the application is approved the money is usually deposited in to applicant’s bank account within minutes. Their service aims to be 100% digital and real-time.
Payday loans have several names and another common name is a “cash advance” loan. All payday loans fall under the umbrella of short-term loans.
Key features of a payday loan are:
- They are typically unsecured.
- They have a higher interest rate than secured loans.
- They are short terms loans.
- The borrower is expected to repay the loan on their next salary date.
- The application process is generally quick, as is the decision of the lender.
See our other articles on where and how to obtain a payday loan.
Who provides payday loans?
Nowadays you can get a payday loan from several places. A few years back you would normally have had to go to a high street bank, a pawn broker or a specialist short term loans company. All of which would require you to physically visit a brick and mortar outlet to apply for your loan. There would have been lots of paperwork to fill in and you would have had to wait some time for a decision.
Nowadays, it is possibly more common to obtain a payday loan online. You no longer have to leave your home to apply for the loan. There are several benefits to obtaining your payday loan online from some of the larger credit providers:
- You can apply 24 hours a day, 365 days a year.
- Near instant decisions, due to their automated application process.
- No need to leave your own home. Can even be obtained on a cell phone with internet access
- No paperwork to fill in. Everything is done online.
- Completely private. You no longer have to interact with people to obtain your loan which can some people can find embarrassing.
- The money is electronically deposited into your bank account. No more cash to worry about.
- Easy to see how much you will have to pay back. Many online lenders have sliders so you can choose how much you need and how long you want to borrow it for. It also shows the total cost of the loan as you change the amount or period of the loan.
There are many more benefits to obtaining your payday loan online. The benefits are so great that when compared to actually visiting a physical branch, some lenders have chosen to offer their loans exclusively online. Many of the largest online payday loans companies do not have even one branch for people to visit.
Checkout our online lenders page for a comparison of the best known online lenders.
How do I obtain a payday loan?
There are two main ways to obtain a payday loan. The traditional (old-fashioned) way is to make an application at a payday lenders branch. However this is certainly more hassle and not as convenient as the more popular method of applying online via a payday lender’s website.
Currently the most popular way to obtain a payday loan is online via a lenders website. With internet access becoming commonplace in most households, more people than ever before are applying for their payday loans online. There are many online payday lenders to choose from. You should take care when selecting your lender. We list some of the more established online payday lenders here.
The great thing about making your payday loan application online is that most lenders have automated their loan application and approval process, which means you will normally receive feedback about your loan application in a matter of minutes. Also you are not restricted to applying for your loan within normal business hours. Most online lenders can process your loan application 24 hours a day, 7 days a week.
Each payday lender will have their own requirements when it comes to applying for a loan, but most will require you to be 18 years of age, have a valid UK bank account, be employed and receiving a regular salary and be a resident of the UK.
To apply for a payday loan jump on over to our list of the main online lenders in the UK.
The pros can cons of an online payday loan
Payday loans have recently received a lot of bad press. Some of the criticism is justifiable but much of it is not. Here we take a look at some of the pros and cons of an online payday loan.
- Available 24 hours a day, 7 days a week 365 days a year.
- It is quick and easy application process.
- No paperwork required.
- Can apply from the privacy and comfort of your own home.
- Very fast decision time.
- If approved, funds are deposited into your bank account quickly (often in under an hour).
- Flexible, you can choose how much you want to borrow and for how long.
- You can apply from anywhere as long as you have an internet connection.
- Unsecured. You do not have to provide any assets as security.
- You do not need a perfectly clean credit profile to be approved.
- The interest rate is higher than a traditional “secured” bank loan.
- Costs and interest can accumulate quickly if you do not pay back your loan on time.
In summary, the pros far outweigh the cons. If you obtain a loan from one of the more established online payday loan providers (listed on this website) you will always be able to see exactly how much you will need to pay back. Should you fail to pay back your payday loan on time, naturally fees and interest will accumulate beyond your initial quotation. When you take out a payday loan, you must carefully consider if you will have sufficient money on the date you have selected as your repayment date.