What are payday loans?

If you’re looking for a short term loans solution, perhaps even just for a minor amount of money, then you may find it worth your while to look at payday loans. Like any other lending product a payday loan involves borrowing money from a company and paying it back with interest.

But, these loans work a little differently to other lending products. These loans are designed to be:

– arranged and approved at short notice;
– used when you only need to borrow smaller sums;
– used to borrow for shorter periods of time.

These loans are typically used for stop-gap, short-term financing. A standard loan, such as a secured home loan or an unsecured loan, may take weeks to arrange and may come with a higher loan limit than you may need. These types of loans tend to be designed to allow people to borrow more money over years.
Payday loans, however, work more on a cash advance principle. You may, for example, need to borrow a couple of hundred pounds to tide you over until you next get paid. Money may be short, you may have an unexpected bill to pay or you may need fast access to cash immediately.

These loans get their name because they give you a cash advance until you next get paid. Used correctly, they are meant to give you virtually immediate access to a small loan for a few days or weeks. Generally, when you take out a payday loan, your pay-back time is set for your next payday.

So, if you take out this kind of finance you may typically find that:

– you are able to borrow a small amount with just a quick credit check;
– your loan may be processed and paid to you extremely quickly (i.e. often within 2 hours);
– you pay the loan back when you next get paid so you don’t have a long-term debt hanging over your head.

It may be important to think about how these loans are meant to work before you apply for one. This may be a great way of getting a quick and easy cash injection when you need it. But, if you don’t pay it back when you are supposed to, then the interest charges may be an issue.

Because of the way that payday loans work, their charges may be a lot higher than standard lending charges. However, if they are used correctly then this may not be an issue to you. Paying back what you borrow on time and not rolling your debt over or continuing to borrow may make this a viable lending solution for you.

Learn more here – “Payday Loans and Cash Advances”