For many loan seekers, all of their cash hassles rest on same day payday loans. Low score, low loan eligibility, bad credit history or no history—nothing bars you from borrowing if you could afford the payment, often market the payday lenders. However, it is important to evaluate your decision and measure the real cost of such a hasty deal.
You must carefully analyse how payday loans work and what impact it can have on your credit profile. Before you apply for these ultra-popular emergency loans, know 5 facts about payday loans, which main street payday lenders would never share with you.
1. Payday loans are the most expensive loans
While payday loans are available despite your bad history, you may be paying just enough to widen the hole in your pocket. Before you avail payday loan you must know that you would be paying at least 1% every day as interest and charges. According to FCA, a lender can charge up to £24 on £100 loan for a month. Owing to the steep cost of payday loans you must restrict payday borrowing for very small amounts.
2. Rolling over payday loan can multiply your debt burden
Most payday borrowers fail to manage the repayments and look for refinancing or rolling over options. This can be a gateway to debt trap with no escape route. You just might owe double of what you originally borrowed within 3 months of availing the loan. The late payment charges are additional.
3. Loan sharks actively target payday loan seekers
Owing to stricter deadline most loan sharks directly contact borrowers seeking payday loans. Apart from imposing fat interest rate and charges they levy shoddy loan terms to harass the borrowers in wake of nonpayment. Many cases of abuse and harassment by payday lenders are reported every year in the UK. To safeguard yourself it is important to ensure the legitimacy of these loan providers.
4. You must borrow only when you could afford
You may find it easier said than done, but it is recommended to borrow only when you could afford the loan. Payday loans as the name suggests are small cash advance loans which are destined to be repaid on your next salary day. You are required to provide a post-dated cheque to the borrower so that as your salary is processed they can reimburse the loan amount.
5. Not the best choice to stay afloat
With poor credit rating, you must opt for the most affordable option. If you need a loan to quickly fill the cash gap, it may serve the purpose. However before you use the funds, you must have a repayment plan at a place. In the absence of a back up to repay a loan, your debt burden would only worsen your credit situation.
However, if you need payday loans for bad credit situation, keep the following thing in mind to stay afloat:
1. Use professional loan advice
Always assess your credit affordability before you avail a loan. You can use a regulated loan broker’s free advice to get easy access to available deals in the UK.
2. Have a repayment plan
Brokers would also help you make a repayment plan. It is important to pay back and build credit rather than entering a never-ending trail of roll-overs.
You must understand that any bad credit loan including a payday loan is not a gap fill arrangement. It should be used as ‘a last debt till I improve my score.’