Payday Loans - the basics
By Michael Strauss
Payday loans, or cash advances as they're alternatively known, are simply short term loans for small amounts, which you repay as soon as you next get paid.
The 'Cash Crunch'
They're a useful kind of loan for getting through the 'cash crunch' - that time towards the end of the month when you're running out of money, but your next wage or salary is still some time away.
They are easily available online, and can be taken out for amounts between approximately £100 and £800 depending on which loans lender you decide to apply through.
They are very easy to be accepted for, providing you have a suitable bank account, usually with a debit card, and are in permanent employment. Credit rating, in most cases, isn't really an issue, and approval can often be given on the same day as you apply.
With most cash advance deals you can also renew or extend the loan, which is useful if you find you can't afford to make the repayment - by paying a new fee, you can delay the repayment date by another month.
Payday Loan Drawbacks
Before applying for a payday loan though, you need to know about the drawbacks associated with them. The main one is that they're very expensive compared to other kinds of credit. A flat fee of 15-25% of the loan amount is common, which might not be too bad if you're genuinely using the loan to cover an emergency lack of cash. The problem really comes if you're using the loan service to paper over the cracks of a poor financial situation. Having to renew the loan every month can quickly become a very costly exercise, and is a situation you'd be strongly advised to avoid if possible.
Having said that, payday loans can definitely be a good choice to ease a temporary cashflow problem, and are quicker and easier to arrange than a more formal personal loan, and provided you don't extend the loan for too long, it will also likely be cheaper overall than a longer term credit agreement.
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