The Guaranteed Payday Loans industry has had a lot of flak thrown at it. Whilst it’s easy to look at the negatives, let’s try something different and indeed look at the positives. Payday loans categorically have their own place in the finance industry. Yes, people may not necessarily like this but it is true. Payday loans are there to service people who have a short term cash flow problem and/ or people who have a bad credit history.
Typical bank loans can be difficult and stressful to apply for. It is an official process with plenty of bureaucracy and awkward and at time humiliating questions. All this is coupled with the intimidating meeting with your bank manager who more often than not cannot even begin to empathise with your situation.
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The great thing about payday loan companies are they are not interested in why you are asking for the loan and how you have arrived at this place. Everybody makes mistakes in life and everybody makes bad choices. Guaranteed payday loan companies do not judge you on this. All they are interested in is moving forward and finding a way to work together.
Whilst different sites have different criteria, there is a solution for everyone. For example some sites may require you to have some sort of employment, while others only require your bank details. The process is simple, choose the provider depending on what your personal circumstances are and make your application online providing the details requested. There will be no credit check if this is one of the options that you have selected which paves the way for a quick and easy transaction.
You should receive your agreed sum of money the very same day and in some cases, within the hour. Once you have the money in your pocket you are in charge of your own destiny and you can push forward and resolve the problem in hand. The only thing you need to remember is that the loan is a short term solution and you must pay it back within the agreed length of time (usually 28 to 31 days) to avoid getting into further debt.
Guaranteed Payday Loans are a great product for people who have bad credit. The providers do not judge you on the reason for your bad credit therefore you can apply for the loan without having to feel uncomfortable explaining yourself. Use the loan sensibly and pay it back with the pre agreed interest within the correct timescale and everybody will be happy.
The payday loan industry is now worth over £2 billion in the UK alone therefore it’s safe to say that many people are finding many reasons to use them. So what is it that makes these types of loans so popular? We managed to survive without them until 2006, therefore what could they possibly bring to our lives to enhance them? Well, the answer is that like any new popular product or service, they have found a gap in the market and produced a product to capitalise upon this and continued to evolve the product depending on the emerging market trends.
The way in which payday loans are marketed are to assist the borrower in an emergency situation. This is because they are the only source of loan available almost instantly. Credit cards, overdrafts, banks loans and personal loans require a lengthy application process which takes a least a week to get set up. However this is no good to someone whose car has broken down on the way home from work and they need the car for the following day to be able to do the school run and go back to work. Coupled with this, thanks to the economy which dictates that households have less income and more to pay out for, it’s very rare that a household actually has enough money in their bank account to pay for the emergency.
The process of applying for a cash till payday loan is very simple with very few qualifying criteria. All an applicant needs to do is access a payday loans company online, complete the application form which should take no longer than 10 minutes and submit the request. Most payday lenders pride themselves on making an instant decision and some even promise to deposit the money (if the request is accepted) within 10 minutes. Therefore if your car has broken down on the way home from work, it is entirely feasible that you will be able to access a payday loan in order to pay for the repairs so that the vehicle is repaired in time for your weekly routine the following day.
People use payday loans for a number of reasons. Firstly, they are the only source of finance available in the short term. Secondly, they are easy to apply for and the decision is made quickly. Finally if a request is accepted, the requested money will be deposited into the borrower’s bank account within 24 hours at the most, therefore they are ideal to help someone out of an emergency situation.
Cash till payday loans are pretty much established as part of the UK financial culture these days, as they have been present in our markets for six years now. Despite many criticisms of the product, they have evolved into a huge industry, now worth £1.7 billion, therefore there are many UK residents which use payday loans and fuel this demand. There are many assumptions about the type of person that would use a payday loan however there has been enough research into their profile over the last few years to dispel many of the stereotypes. Therefore let’s look at the type of people who use payday loans.
The payday loan industry has been criticized by many for allegedly targeting ‘vulnerable’ customers, i.e. those with limited knowledge and capacity to understand the product and who are destitute and so desperate for money that they simply have no other options. Whilst there might be a very small percentage of people who fit into this category, it is simply impossible for the entire payday loan market to be made up with people who share these characteristics.
The way that cash till payday loans work is that a loan of between £50 and £1000 is borrowed for a period of time between 15 and 31 days. The idea is that the borrower will repay the loan in full on their next ‘payday’ when they have the entire amount of money available in their bank account. To be accepted for a loan, the applicant must be in employment and earn at least £750 per month, which eliminates the myth that payday users are destitute as they all must be in some sort of employment.
Research into the payday loan industry has highlighted some key statistics. The average household income for payday loans users is £24,000 and 94% of payday loan users are in full time employment. Furthermore, most social demographics borrow money from payday loan companies, including pharmacists, teachers and accountants. These statistics paint a picture of a customer base that have respectable jobs and earn an adequate amount of money, and not a consumer who is desperate and destitute.
It is fair to say that there are many different characteristics of people who access payday loans however the statistics highlighted are really useful to dispel some of the stereotypical rumours. More research into the payday loan user profile definitely needs to be carried out, but that fact that users must earn a minimum of £750 per month to qualify for a payday loan in the first place illustrates that users have some sense of responsibility and earning and ability.
Choosing any kind of financial product should always require research into the best option as ultimately, any decision you make is going to cost you money and have short and long term implications, therefore you need to be certain that any decision you make best suits you. Choosing a guaranteed payday loan is no exception, as regardless of how much you need the money, it is essential that you consider certain factors before proceeding otherwise it could result in you incurring debt which you simply cannot afford to repay. Therefore, although we would love to be able to help you arrange a loan make sure you have considered the following factors:
What do you need the loan for?
As a general rule, payday loans should be used for necessities and not luxuries. This means that if you find yourself in a position where you cannot afford to pay for a utility bill, a car repair or a household emergency, then a payday loan is a good solution. If you want the money to pay for a night out, clothes or other such luxuries, it is not advisable to use this type of loan or any other kind of credit as luxuries should be something that are saved up for and used as a treat.
Do you qualify for the loan?
You qualify for a payday loan if you meet the following minimum criteria:
Applicants must be 18 years of age or older
Must have a valid UK bank account that can accept direct debit payments
Must be employed, receiving a regular salary
Must be a resident of the United Kingdom
How much will the loan actually cost you?
Be mindful of how much your loan will cost you. The slider tool on the home page indicates how much your loan will cost you for the first month, however if you choose to ‘rollover’ your loan you will incur additional charges at differential rates of APR depending on who your provider is. Therefore make sure that you read your terms and conditions when you are awarded the loan and understand how much it will cost you if you do decide to postpone repayment.
Can you afford to repay the loan?
Before confirming the loan, make sure that you are able to make the full repayment on time and in full on the date of your next payday. If you cannot do this and you choose to proceed with the loan, be mindful that postponing repayment will incur interest making your loan more expensive.
What are the benefits to you of accessing the loan?
This type of loan should be used for necessities, however it is also a less expensive way to borrow money than most unauthorised overdrafts, therefore for those of you that are finance-savvy, use this loan to save yourself money in this situation. In addition to this, accessing a payday loan and repaying it according to the terms and conditions is a quick way to boost your credit rating. This is because it leaves a positive footprint on your credit report proving that you can manage your finances.
There has been very little research into the UK payday loan industry, partly because it was only introduced to the UK in 2009 and partly (based on an assumption) that there is simply not enough money on the government’s budget to continue to measure and monitor the industry. Certainly more will be known by the end of 2012 following the Office of Fair Trading’s review of the market sector, however until then we can only base our facts on existing evidence, namely the report written by Marie Burton of ‘Perceptions of the payday loans industry in Great Britain’ which was researched and published in 2012. Therefore, most of the evidence cited below is garnered from this report.
The popularity of the payday loan industry is largely attributed to the recession. The increasing demand is mainly thought to be also because of the loans accessibility online. Using statistics to predict the future of the industry has determined that it is likely to grow by a further 40 – 45% in the coming years.
The following companies have been identified as the payday lenders with the largest market share in the UK:
● Dollar Financial Corp (including The Money Shop and online provider Express Finance
● Mem Consumer Finance (trading as Month End Money, Payday Now, PayDay UK, Payday
Store, Quicksilver and Payday Loans)
● Cheque Centres
● CashEuronet UK LLC (trading as QuickQuid)
● Albemarle & Bond Holdings PLC (includingHerbert Brown & Son)
● H & T Pawnbrokers
● National Cash Advances
The average household income of a payday borrower varies and demonstrates potentially surprising results. Almost 70% of loan users have a household income and the average amount of income is £24,492. The complete synopsis of these results is as follows:
Under £15,499 = 46%
£15,499 – £24,999 = 21%
£25,000 – £39,999 = 20%
£40,000 – £49,000 = 7%
£50,000 – More = 6%
Approximately 50% of payday borrower’s are under the age of 35, and 60% are not married or co-habiting and most of this demographic do not have children. Moreover, the most popular location for a payday borrower is either the North of England or Scotland. In contrast to this the most popular location of payday lenders is either London or South East England.
This information is extremely interesting as it gives you a real insight into who a typical payday loan consumer is. It dispels the myth that only homeless and destitute people request the loans as the average household income of a typical customer is over £24,000.
Cash till payday loans have become a popular source of short term finance in the UK ever since they were first introduced in 2006. The concept of payday loans is that they are a short term loan of between £50 and £1000 which can be borrowed for between 15 and 31 days. The repayment of the loan plus the APR or fixed rate for one month should be made on the borrowers next payday as this is when they will have enough money in their bank account at any one time to make the full repayment. It is only when payday loan users postpone the loan repayments that they start to incur high rates of interest and the loan ultimately becomes difficult to repay. Therefore to avoid this dangerous situation, let’s look at five ‘don’ts’ when using payday loans.
Borrow money for anything other than emergencies
Cash till payday loans are not the cheapest way to borrow money because of their high rates of APR, therefore only ever use these loans for emergencies where you have no other borrowing option.
Give false information to try and obtain a payday loan
Giving false information to obtain a payday loan is ultimately only cheating yourself. If you have to give false information it probably means that you do not qualify for a payday loan, therefore you should not be requesting one. Look for alternative sources of finance.
Rollover the loan
You are legally permitted to ‘rollover’ (postpone repayment) a payday loan as many times as you wish. As tempting as this may be, every time you do this you will incur another months APR which when you consider that the most competitive rate of APR is 1737%, will lead to a huge repayment amount. Therefore make sure that you make the full repayment including the rate of interest on time and in full.
Borrow a payday loan to repay another payday loan
Shockingly a massive one in four payday loan borrowers borrow one payday loan to repay another. This is absolutely false economy and will lead to very severe financial implications. If you feel that you have no other choice because you cannot afford to repay the payday loan then it is essential that you contact an impartial debt management service like CCCS as soon as possible to get impartial advice on how to repay your debt sensibly.
Select a substandard payday lender
There are thousands of payday lenders in the market therefore make sure that you select a reputable lender who has good customer reviews and the most competitive rates of APR. If you are unsure then visit an impartial comparison website like moneysavingexpert.com.
Approximately half a million people take out a payday loan each month in the UK therefore there is a huge demand for this type of financial solution. One of the biggest selling points that guaranteed payday loans companies often cite is that they are cheaper than overdraft fees. Therefore we have looked into this statement to understand if it is actually true.
To determine the answer to this, it is necessary to look at guaranteed payday loan and bank charges a little closer. The average APR of a payday loan is 1737% which on the surface seems pretty high. This means that to borrow £100 would cost you £25 every month to repay at this level of APR. However the payday loan product is intended to be a loan until your next payday, therefore the total cost of borrowing £100 is £25. The APR does vary depending on which payday lender you choose, therefore the APR can be higher or lower.
Bank overdrafts can either be authorised or unauthorised. Authorised overdrafts are pre agreed, for example a student overdraft of £1500 and unauthorised overdrafts are when you have not pre-arranged to borrow that amount of money from your bank i.e. if you go over the agreed limit. In 2011, high street banks charged anywhere between £22 and £186 per month for unauthorised bank overdrafts. Therefore there is a huge difference between the cost of an unauthorised overdraft of £186 and a payday loan cost of £25 and a payday loan is absolutely the best option.
It is worth noting however that the cost of authorised bank overdrafts is anything between £0 and £26 per month, but the average amount is approximately £1.69, therefore in this scenario an authorised bank overdraft is much cheaper than any other option.
Unfortunately there is a real need for all of these short term financial solutions thanks to the spiralling costs of household living. It is also impossible to anticipate every potential monthly outgoing thanks to nasty surprises such as cars breaking down, vet fees or school trips, therefore the best thing to do is have a plan for this eventuality in the shape of an overdraft or short term loan.
In summary, the cheapest way to overcome a short term financial problem is to agree a secure overdraft with your bank. However if like most of the UK population, you use this up without realising it or you indeed rely on it each month to meet all of your outgoings, then a guaranteed payday loan is much cheaper than borrowing a further unsecured amount from the bank. All of these scenarios will vary depending on how much banks or payday loan companies decide to charge you for your loan as different lenders charge different amounts, therefore it is essential to familiarise yourself with percentage APR and other charges. This illustration is the cheapest option based on average payday loan and unsecured bank overdraft charges, therefore is most likely to be the best solution for you.
For more information on how payday loans compare to other sources of short term borrowing, view our infographic
Cash till payday loans have become a popular way to subsidise income following the rise in living costs and a squeeze in wages. It is harder than ever to make one wage last until the next payday and more and more people are starting to worry about cost of living and how they will make payments. People are no longer purchasing luxuries like cars or holidays, they are now concentrating on paying for necessities only like utility bills, food bills and mortgages. As the number of repossession on property has increased since 2011 by 10%, this is much easier said than done.
Cash till payday loans are short term loans for a period of between 15 and 31 days. The amount that you can borrow can be anything from £50 to £1000 and the rates of APR vary per lender however £25 is a standard fixed charge to borrow a loan for one month only. After this initial one month period, the rate of APR kicks in and increases month on month. This amount is advised to the customer at the application stage of the loan.
If you only have a certain amount of money each month, you should always prioritise how you spend that money. The most important thing is to be able to pay your utility bills, namely your mortgage. Your mortgage repayments should be made on the same day of each month so it should be fairly straightforward to try and plan your finances to meet your mortgage payments. If however you do find yourself short, do not fear as this is the situation which lends itself perfectly to getting a payday loan.
Payday loans are very quick and easy to apply for. All you need to do is access a loan application online or via a retail outlet. The loan application process should take no more ten minutes to complete and the lender should inform you within the hour whether or not your application has been accepted. The cash deposit will then be made into your bank account within 24 hours, maximum. Therefore you should be able to use payday loans to cover any shortfall of your mortgage repayments.
Cash till payday loans are perfect to be able to assist you with your mortgage repayments if you find that you are short on a particular month. Be mindful that if you do not adhere to the terms and conditions of the payday loan, you could end up in very severe debt, therefore you must ensure that you use the payday loan for one month only.
Payday loans are firmly established in the financial market as a short term source of finance. Ever since they have arrived in the UK, their popularity has soured thanks to their accessibility. The demand for these types of loans is so high because of the current fledgling economy as more and more households are struggling to make lower salaries cover higher costs of living. Payday loan customers are likely to have tried to access finance from more traditional sources such as bank loans and overdrafts, however financial institutions are more reluctant to lend than ever due to past mistakes, therefore furthering the demand for payday loans.
The accessibility of payday loans certainly encourages this new borrowing trend as only a small amount of criteria needs to be met in order to qualify. This includes being over the age of 18, having a UK bank account, being a UK citizen and having a minimum monthly salary of £750. Even individuals who have a poor credit history would be eligible for a payday loan as credit checks are very lenient. Therefore if you own your own company you will be able to access a payday loan providing you meet these criteria.
If you do run your own business and are considering applying for this type of loan, it is very important that you consider why you need the money and identify exactly how you are going to be able to repay the loan. If you cannot answer these questions then this type of loan is unlikely to be suitable to you and could end up costing you a lot of money in the long run. This is because most payday loans after a period of one month, introduce their high rates of APR. An example of this is 1737%, therefore it is a very expensive way of borrowing money. Whilst most payday products offer a ‘rollover’ facility which effectively means that you can postpone your loan repayment until the following month, this practise is ill-advised as it means that your debt will begin to spiral and will become increasingly harder to pay back.
There are many reasons that you would require a short term loan if you run your own business including to purchase stock, to lubricate a cash flow problem until your invoices have been paid and to pay employees a monthly wage.
The exact origin of payday loans is a little sketchy. Resources indicate that the concept of ‘loans’ started as far back as thousands of years ago when Rome was in power. The only thing for certain is that payday lending stores began to appear on the US and UK high street in the early 1990’s and they quickly grew in popularity thanks to economic conditions which lent themselves to breeding the demand for payday loans, and also the convenience of obtaining these loans further fuelled their demand. Then, as technology evolved, new digital platforms emerged for payday lenders to reach their customer base and the level of demand increased phenomenally.
The evolution of loans really began in the 1930s where many companies offered outlets where their employees could purchase clothes, food and other necessities on credit. The cost of these items would then be deducted from them in their next pay cheque. This concept developed and companies began to introduce ‘cheque cashing’ loans which were based on wage slips and not credit checks. Stores called ‘Mom and Pop’ stores opened especially to cater for these types of loans where customers would write post-dated cheques for the agreed amount plus a small fee.
In the 1990’s payday loans really took off as Mom and Pop stores merged and became household names payday lenders. The number of retail outlets grew from none at the beginning of the 1990’s in the US to 22,000 in the US today, where there are two payday lenders for every Starbucks found on the high streets. This trend was also replicated in the UK and across the UK high streets.
When the internet was introduced in the late 90’s, payday lenders identified a huge opportunity to reach out to their customer base via a different medium. Setting up websites meant that customers no longer had to go into town to apply for their payday loan, they could do this from the comfort of their own home. Consequently demand for payday loans increased tenfold and reached an all-time high. This trend has continued to increase every year and the industry is now worth £32billion in the US and £1.9 billion in the UK.
The history of payday loans really stems from the concept of corporate loans for their staff and gradually the concept of loans evolved. There is no doubt that the introduction of technology, in particular the internet, increased the popularity of payday loans phenomenally.