Are Payday Loans Low Cost Loans?

If you have just come home and found that a final demand for a forgotten-about utility bill has landed on your doormat, your first reaction may be to panic at the prospect of having it cut off - particularly if you don't have the money to pay it immediately. For this and any other such similar eventuality though, you may want to see if you can find low cost loans to give you a quick cash injection to tide you over until payday.

Payday loans

If you are looking for a cash advance on your next payday, then the aptly-named payday loan may be an option. These cash advance loans are based on the principle that you only need to borrow a relatively small amount of money for a short period of time - typically until your next payday. The amount you pay back is agreed when the cash advance loan is arranged and comprises the sum borrowed, interest due and possibly a bank transfer fee.

Who is eligible for a loan?

Perhaps the most obvious thing to note about these cash advance loans is that they will only be available if you are in employment - you need a payday. You will also usually have to be over 18 and a UK resident.

So how do you go about arranging a loan?

Many companies who provide this kind of finance operate over the internet and once you have completed a short online payday loan application, a decision will typically be made almost instantly. If approved the cash could be in your account within 2 hours or the next day at the latest.

What else might I need?

Because of the electronic nature of this type of transaction, you'll need to have a bank account and a debit card. The payday loan company will typically take your card details so that the repayment can be set up to happen automatically on the agreed date. You don't have to do anything else.

Anything else I need to know?

Payday loans are specifically designed to be of short duration, so while the interest rate charged on these types of loans may look high, compared to unauthorised bank overdrafts for example, in some cases payday loans could work out to be comparatively 'low cost' loans.

The repayment is for the whole sum so the amount borrowed needs to be realistic in relation your actual salary. Pay day loans are not designed as a long-term facility and may not always be an appropriate solution if you have recurring debt problems and are financially struggling from one payday to the next.

I've paid off my loan what happens now?

Once you have repaid your loan you are free to apply for another if the need arises. Payday loans don't just provide a temporary solution for a crisis situation; they can also be used to take advantage of bargains or special deals that may not be around for long. However, do note that good payday loan companies do not endorse regular lending via payday loans.