Payday Loans

Your car just broke down and it will cost £250 to fix it - payday is two weeks away and you're a little brassic. What are your options? If you are looking for some quick fix in the form of cash to tide you over until the next pay day but have bad credit, perhaps you've considered visiting a Payday Loan company.

Well, the process is quite simple. Payday lenders are able to offer an individual the opportunity to take out a loan of a specific amount for a short time, which is to be repaid with their next paycheck (normally between 1 and 3 weeks). Most agencies also ask the "lendee" to write a post-dated cheque or give a bank account number to repay the loan on the agreed upon date.

Because this is considered a "short term loan" the standard rules of lending do not apply. The creditor doesn't usually check out the individual's credit history. So for those with bad credit, the payday loan company is looking for proof of employment (a recent payslip) and either a cheque or bank account. For this reason alone, people who are having problems clearing their credit find this a really good option - the money is available when it is most needed and repayment is easy with the next paycheck.

Payday loan companies can offer several different rates of interest, but as a rough guide, they would charge about £25 for every £100. To repay a £500 loan, you would pay at least £125 in interest, perhaps more. So effectively this is £125 for the use of the money for two weeks.

For people in a temporary fix, £125 to help them out of a fix doesn't seem like too bad a deal. If a person is suffering from bad credit, they may not have a lot of traditional lending options open, and have some expectations of paying the price for their bad credit.

Payday loans are a viable option for people who are in control of their financial situation. If you know that you are going to be able to pay the loan and the service fee in two weeks, this arrangement can work well for you.

Unfortunately, some people are getting in at the deep end when it comes to payday loans. They enter into the agreement knowing that in two weeks they won't have the funds to pay back the loan. They are just getting into an even worse state of debt. When the loan period comes to an end, they reapply for another loan, and of course need to pay even more. It's more common than you might think for these people to spend tens of thousands each year just in interest fees.

Payday loan companies represent an option for those individuals with bad credit who are working on getting back into a fit state financially. The simple truth is, for one reason or another, a lot of people aren't able to have credit cards. Credit cards are the first resort of most people use when placed in an emergency position. Payday loan companies offer the "credit card alternative" to people with bad credit - an opportunity to use their money for a short period of time with repayment plus interest. For people who are responsible and realistic about their commitments, this process can be a lifesaver.

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