Three Things to Consider When Applying for a Payday Loan

Payday loan considerations

Applying for payday loans online is pretty straightforward, but that doesn’t mean you can afford to take your eye off the ball. There are several things you need to be aware of when filling in an application for a payday loan and it pays to be prepared. Here’s a simple guide to the three most important factors to consider, to help you get your application right first time.

1. How quickly do you need the money?

Before you decide to apply for a payday loan, there are a number of questions you should ask yourself, such as ‘how quickly will I be able to pay this off? and ‘when do I need the money?’ How quickly you need the cash will depend on the reason you need the loan.

The nature of short-term loans is that they are available quickly - often on the day you apply - but they also need to be repaid quickly. As a result, payday loans might be most appropriate for people who only need a small amount of money and may not want to take on a longer-term financial commitment.

Payday loans online are known to be easy to apply for because the applications are very straightforward. Providing you meet the lending criteria and pass any credit and affordability checks, a customer could have the money in their bank account in as little as an hour with certain lenders. When you are deciding which payday lender to apply with, pay attention to the payment speeds advertised on the lenders’ websites and opt for one that can get the money into your bank within the time you need. However, remember that lenders can only do this if you have all the information and documentation needed for the application, so check any requirements before you start.

2. Do you meet the eligibility requirements?

Another factor that is important to take account of when applying for a payday loan online is eligibility requirements. Most online lenders will have minimum requirements, which usually include being over 18 years of age, holding a UK bank account and residing in the UK.

However, any responsible lender will also need to see proof of your income and employment status, for example, before offering you any money. Carrying out credit checks and ensuring borrowers have the means to repay the money lent is an important aspect of responsible lending.

If you have a history of problems with debt and your credit score has suffered as a result, this doesn’t necessarily mean that you won’t be able to secure an online payday loan. However, you may not be offered the best rates and may have limits on the borrowing amount and the repayment term.

To protect yourself, it’s a good idea to check any lending criteria published on a lender’s website before starting the application process. If you apply for loans that you are later turned down for, this can damage your credit score and make it even more difficult for you to obtain credit in the future.

3. Have you read the terms and conditions?

Before you even think about applying for an online payday loan, read a lender’s terms and conditions thoroughly. Most will publish clear terms on their websites, as they are required to do under the FCA regulations. They may have a Frequently Asked Questions section on their site, which makes it easy to find the answers to any questions you might have about how the loan works.

The most important factors to check when looking at a lender’s terms and conditions pertaining to:

Extra charges and fees

Some lenders will charge fees to borrowers on top of the interest payable on the loan. Fees may be payable for late or non-payment, early repayment or setting up the loan in the first place, for example. Check whether fees or charges apply and whether you are happy with them.

What happens if you miss a payment?

Terms and conditions should set out clearly what happens if a borrower fails to make a scheduled repayment. Late or non-payment fees usually apply and you may also have to pay more interest on the loan if it takes you longer to repay. Most responsible lenders will encourage you to speak to them if you are having trouble meeting your repayment responsibilities to try to work out a solution that is acceptable to both parties. However, bear in mind that this will usually involve larger interest rate payments over the life of the loan.

Interest rate payable

Interest rates are often advertised as Annual Percentage Rate (APR), which details the total cost of the loan as a percentage of the amount you are borrowing over an entire year. For payday loans and short-term loans, APR is not always a useful measure for comparison. Instead, try to find the Total Amount Repayable (TAR) or simply compare the interest rate and check for extra charges.

Once you have identified the right loan for you, applying for a payday loan online is very simple indeed, with just a few pieces of information usually required. If you do your research beforehand and are eligible, there’s no reason you can’t have the money you need straight away!

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