The UK payday loans, or short term loan industry has struggled with a mixed reputation in recent years. Nevertheless, since FCA regulations were announced in 2014, short-term loans have found their place in the market. Regulations are as tight as anywhere in the world. Loans are a useful option for people in need of a quick, small cash injection. However, they are not the right option for everyone, so Moolr have put together a short term loan checklist.
Though there are many reasons for this, including political uncertainty and austerity in troubling times, it’s clear that loans are a vital resource for many in the UK. With that in mind, is a payday or short-term loan the right option for you?
Given the wealth of options available in a crowded market, the answer depends on a number of factors. It is vital to ask yourself a few questions before making a final decision.
With the average UK household spending over £500 per week, it’s easy to see how borrowing is on the up. The first question to ask when looking at loan options is ‘how quickly do I need the money?’. Short term loans are, as the name suggests, intended as short-term options to tide you over until your next salary or wage payment. Often the money can be deposited in the borrower’s account within 24 hours, or even the same day. Speed is a big factor.
If you can afford to wait a few weeks, a loan from your bank might be a better option. Such an option may attract lower interest rates, less stringent repayment terms, and the ability to spread repayments over a longer period.
The amount you require also makes a difference here. Bank loans are an excellent solution for larger amounts but can be harder to arrange for small, everyday sums. This is due to the relatively low-interest rates banks charge. For loans to be worth their while, they have to be for significant amounts. For a smaller loan, credit unions can be a good alternative to payday loans. If you have time to shop around, you can find one that’s perfectly suited to your needs. Moolr have taken the stress out of sourcing a loan however. We have collected market-leading lenders in one convenient place.
Of course, sometimes you really do just need a quick lump sum to cover an emergency. In that case, it’s always worth checking with family or friends to see if someone can lend you the money. The downside is the strain it can put on your personal relationship with the lender, but this can be avoided by following a few responsible borrowing principles before any money changes hands.
Most of the above loan and credit options rely on a good credit report at the point of application. Those with a poor score may well find themselves only offered bank accounts with no overdraft facility, refused credit cards, and denied larger or longer-term loans. In this position, payday loans are worth considering, as many payday lenders don’t discriminate on the grounds of previous bad credit scores. Please not however that a credit check will still be required.
If you decide that a payday or short-term loan is the right option for you, make sure you’re aware of the key risk factors. Do your research and decide what is best for you. Only ever borrow as much as you need .Resist the urge to take a loan for non-urgent purchases that you could just save for the traditional way. Make sure you have a clear plan for your repayments, and that you know how much and how often they will be. Finally, shop around to find the best deal based on how much you want to borrow, how much you can afford to pay back, and how quickly you can pay it back.