Payday Loans - are They a Good Idea?

by : Nick Cox

Payday loans are a convenient way to obtain quick cash. They are especially useful during times of financial crisis, where you are left struggling for money until your next payday, hence the name.

How do they work?
Payday loan amounts vary, but they typically range from as little as ?50 to as much as ?800. The amounts made available are based on earnings, with many lenders only borrowing to those whose monthly income exceeds ?750.

Pay day loans are also known as 'short term loans'. A payment term can be as short as two weeks. This time frame can be varied to suit the borrower's needs, but additional charges and interest fees will be added. It's therefore wise to pay back the loan as soon as possible.

The majority of lenders will charge you ?20 for every ?100 you borrow; however, this can vary, with some providers charging in excess of ?30.

Who are they right for?
If you are over 18 and you have a regular income then you can qualify for a payday loan. They are particularly easy to obtain as no credit check is done on the borrower before hand.

Where do I get one from?
There are no shortages of credit companies in the UK, with over 500 companies listed that provide payday loans. Probably the easiest way to find a good deal is to use an internet price comparison site. Always check the reputation of the company first; making sure the company has been in business for at least two years.

Are they a good idea?
Payday loans have an extremely high rate of interest. It's therefore probably wise to consider all other options available to you before agreeing on a payday loan.