Pay day Loans – True or False?

Pay day loans have grown in popularity in recent times, especially as more and more individuals find themselves facing financial difficulties. Despite their popularity, a number of people still remain unsure of the facts about pay day loans and a lot of rumours and false accusations have circulated around these products. To help borrowers understand these forms of money lending, here is a quick guide to what is true and false about pay day loans:

I will be given all of the facts up front: TRUE
All pay day loan providers will ensure that you are given all of the information about your loan during your application. This means that you will know how much you need to repay and when, helping to encourage responsible lending.

APR means that I will repay £1737 if I borrow £100: FALSE
Whilst the APR of these sorts of loans will often be considered high, the typical repayments for a £100 loan will not amount to this much. This is because the short term nature of the loan will mean that the APR is not truly representative of the interest amount. Whilst APR will vary between lenders a typical example will see £20 of interest accredited for every £80 of loan, putting the repayments of a £100 loan closer to £125 than £1737.

A credit check will be conducted during the application process: TRUE
Whilst pay day loans are sometimes advertised as having no credit checks, this can be somewhat misleading. A credit check will always be conducted but will typically be less stringent than that of other types of loan. This means that even individuals with a poor or negative credit rating can still receive a loan and a pay day loan could even help to boost their credit rating.

I can receive one even though I am under 18: FALSE
This is not true and pay day loans, like any type of money lending, are controlled by strict laws. You must therefore be at least 18 years to receive these loans.

I could receive the money within one hour: TRUE
Whilst this is not guaranteed and may incur an optional extra charge, some loan providers will offer applicants the chance to receive the loan amount within one hour of their application having been approved.

How to apply for a pay day loan

The application process for a pay day loan is relatively simple and will be available from a number of money shop lenders. Applications are typically handled online and take only a few minutes to complete.

The criteria required for applicants requires them to be aged 18 or over and to be in some form of paid employment. This can be either full or part time but must be paid. The applicant must also be a UK resident and must have an active UK bank account for the funds to be paid into.

If the application is approved then the loan amount will be transferred to this bank account. Debit card details are requested during the application and these are then used to make the repayment on the designated day. This means that applicants simply have to ensure sufficient funds are in their account at this time in order to make the repayment.

Back to Articles