Fast Payday Loans are mainstream in the UK
In many countries it can be hard to find financial help when people need it but here in the UK fast payday loans are available to anyone provided that they meet some simple criteria. To be eligible to get fast payday loans most applicants need to have a permanent UK address, be 18 or over, have a permanent job (not a contract based one) earn over £750 a month which is paid monthly and also have a UK bank account with a debit card. As long as a borrower fulfils those criteria and can have their identity confirmed quickly, usually by looking at their credit report, then they should be eligible for fast payday loans.
Although, that is the practice in the UK, in the USA and other countries it is much harder for someone to borrow money to bridge a gap in their finances. In fact, in some US states payday loans are not legal and in other states where they are legal strict laws govern them. The reason that there is any controversy over taking out payday loans fastat all is that payday loans require borrowers to pay substantially higher rates of interest on them. This is because of the shorter period over which they are lent.
Value For Money
If someone borrows money on a credit card, they often let the balance remain in debit and just pay off a little money here and there throughout the year which is how the lender makes money. With fast payday loans, lenders have a shorter time span in which to make money from each customer and they do so by charging interest. Because borrowers almost invariably take out and repay a payday loan within a month (often as little as two weeks) the rate of interest charged on the loan is higher to provide the lender with a reasonable return.
If you use the same rules applied to long term loans and apply them to a short term loan it can seem that an alarmingly high interest rate is charged. In reality, payday loans are only meant for a short period, in contrast with mainstream lending which is designed for periods measured in years. Thus the regulatory requirement to display the APR (annual percentage rate), doesn't really do justice to fast payday loans.
Alternative Options
If you find yourself short of cash halfway through the month and you need some money to get through until pay day, using a credit card is one option, assuming you still have some space left. However, with credit cards it is tempting not to pay them back right away and to just pay off the interest each month, resulting in them slowly accumulating debt. Credit card companies are happy with that because they make money on the interest that you pay each month.
Payday loans are different because you agree to pay them back as soon as you take them out and instead of the cost being spread over the year as you pay them back in bursts, the interest is one, honest, upfront amount which you pay back as soon as you get paid. That means that in some cases if you are not the best when it comes to financial organisation, payday loans can work out far cheaper in hard cash terms than a credit card, despite the higher rate of interest.
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