You’ve probably heard of a payday loan before. However, if you’ve never had to take out a payday loan, or are considering taking one out for the first time, you probably have a lot of questions about how they work. Don’t worry, we’ve got you covered!
Question: What is a payday loan?
Payday loans are quite straightforward. They are a loan, offered by a payday lender, to tide you over until your next payday or the end of the month, where you will promptly repay the loan. However, it will take you a little longer to pay them back, you can often work out a specialized repayment plan with your lender over several months. You will, of course, pay interest on this loan, though the amount of interest varies depending on how much money you borrowed and the amount of time it takes to pay it back.
Payday loans are most frequently used to help the borrower deal with an unexpected financial emergency – such as damage to their home or property, or their car breaking down. However, they can also be used to help you deal with unexpected debt, which can occur when you lose a family member, such as paying for funeral costs or medical treatment. After all, during a difficult time such as the loss of a loved one, you should be focusing on managing your grief and not worry about how you are going to afford to pay for the funeral and other costs. As COVID-19 continues to have a devastating impact, it’s likely that the number of people in the UK needing to take out payday loans will rise significantly.
Question: Who is eligible for a payday loan?
Each loan company will likely have different requirements you need to match in order to be eligible for a loan from them. However, if you are applying for a loan in the UK, you must be a UK resident aged over 18, with a permanent UK address. You should also be employed, although it does not matter if this is on a full-time or part-time basis.
Companies such as WageMe usually require you to fill in a short survey, detailing your employment history and spending habits (bills, utilities, food and drink costs per month, etc,) and can let you know whether or not you are eligible for their loan within 30-90 seconds.
Question: How much money should I take out?
When you are under a financial strain, it may be tempting to take out as much money as possible from the lender. However, this is likely unwise. Remember, you have to be able to pay back the money you borrow and you don’t always have a long time to do this. Therefore, you should try to only take out exactly what you need. For example, if boiler repair is costing you £1000, you do not need to take out £2000. Plan ahead so that you know exactly how much you need and don’t land yourself in unnecessary debt.